Now that final regulations have been issued for marijuana consumption lounges to begin operating in Nevada, Las Vegas cannabis executives are gearing up to lure customers off the Strip and into their smoking rooms.
Many Las Vegas business owners have been waiting upward of five years for the final go-ahead on consumption lounges and are eager to capitalize on visitors who need a place to consume in this tourism-dominated market.
The law allows for lounges to begin operating statewide as early as the end of 2022 and for licenses to be processed beginning this fall.
The state is allowing 40-45 licenses for lounges attached to existing marijuana retail stores and 20 for stand-alone establishments, including 10 with sharply discounted fees reserved for social equity applicants.
An estimated 60-65 existing retailers have expressed interest in opening consumption lounges.
Consumption-lounge hopefuls have begun to implement their own unique strategies for making profits in an untested market, a select few of which include:
- Focusing on a comfortable, calm space to provide an alternative to the nightclub atmosphere of the Strip.
- Converting an existing restaurant to include the option of “infuse-your-own-food.”
- Using a consumption lounge to drive traffic into nearby businesses
“Cannabis tourism is massive,” said Christopher LaPorte, founder of cannabis hospitality company Reset Vegas.
“We can really envision a cannabis tourism destination spot.”
Many in the Nevada cannabis sector are hoping to throw their hats in the consumption-lounge ring, including Planet 13, a massive dispensary and entertainment center located near the Strip.
The company plans to combine the consumption lounge with a restaurant experience.
“We serve regular food, and you infuse your own food,” said Larry Scheffler, co-CEO of Planet 13 Holdings.
“If you have a steak, we would give you a pad of garlic butter with THC, a salad you can get (infused) salad dressing and so on.”
Scheffler said he does not expect the lounge to be a big sales driver.
Instead, it will direct new customers to the rest of the Planet 13 experience, most notably a nightclub the company recently opened in the same building under a different business license.
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That licensing arrangement skirts rules that do not allow lounges to serve alcohol and cannabis in the same building.
“In the same building we will have consumption lounges, a cannabis museum, smoking lounges, a club – everything under one roof,” Scheffler said.
The rules about alcohol have prevented others in the Las Vegas cannabis space from even considering opening a consumption lounge.
“If you can’t sell alcohol, I don’t get how you make money,” said Larry Doyle, owner of Las Vegas-based dispensary Euphoria Wellness.
“Locals may go once out of curiosity, but tourists generally don’t leave the Strip.”
Other businesses, such as vertically integrated retailer, cultivator and processor Thrive Cannabis Marketplace, are opting to stay away from the night-club atmosphere and focus more on comfort and hospitality.
“I don’t think the same user goes to a nightclub as they do a consumption lounge, so we’ll definitely go with more of a curated food and beverage program, and just have just a really cool, clean kind of environment for people to hang out and consume their cannabis,” Thrive CEO and Managing Partner Mitch Britten said.
Thrive has partnered with Reset Vegas, and LaPorte said one priority is to destigmatize the concept of a consumption lounge and turn it into something Las Vegas consumers are familiar with.
“How many people think this is going to be a giant, smoke-filled room right now? Clearly, that’s been what’s been holding this back for so long,” LaPorte said.
“People are assuming this is going to be some giant cumulus cloud in the middle of a venue. No, this is going to be a Vegas food and beverage experience.
“I can’t tell you how many times I’ve had to say, ‘This isn’t going to be an opium den.’”
LaPorte also believes consumer education will be a key strategy to remain successful as a consumption lounge. Another key component: a really good air filter, specifically an HVAC system.
“If you look at a casino floor today, it smells like something nice. Why is that? There are plenty of people smoking cigarettes in there,” LaPorte said, indicating that, with new developments in air filters, the average consumer would not notice any smoke in the room.
Jumping through hoops
It might be a challenging few quarters for businesses that want to open a consumption lounge because of red tape at the state level, not to mention potential insurance qualms.
“I think you’re going to see a lot of the same type of legal difficulties that people experience if they open bars,” said Jonathan Robbins, chair of Cannabis Practice at Miami-based law firm Akerman, which represents clients across the country.
“You have the added complexity of dealing with a product that is not legal under federal law.”
After potential lounge owners have navigated the state licensing process, Robbins said, securing insurance might be another headache.
“When you have people actually consuming on premises, it could open a whole host of new issues from a liability perspective,” he added.
Robbins said the insurance issue is a common denominator in many legal states and will not necessarily prevent consumption lounges from getting insurance, but it could be much harder to get and much more expensive than some might realize.
Consumption lounges also face a whole new host of issues that are not necessarily new to the cannabis space, but people consuming on premise adds another layer of complexity.
“We don’t want organized crime. We don’t want people operating motor vehicles while under the influence, we don’t want sales to minors,” Robbins said, indicating that any infractions could potentially lead to federal intervention.
MJBizDaily has previously reported on the state of social equity in Nevada’s cannabis industry, which has been heavily criticized in the past for issuing only one fully Black-owned retail license and two Black-owned cultivation licenses out of more than 330 permits.
However, Nevada state legislators went to great lengths to include language in the regulations with regard to diversity and inclusion.
Today, the CCB voted unanimously to approve regulations surrounding the licensing and operation of cannabis consumption lounges. pic.twitter.com/1O3R3cXIsr
— Nevada Cannabis Compliance Board (@NevadaCCB) June 28, 2022
The state required half of all consumption lounge licenses issued in the first round to be given to social equity applicants, which keeps the door open in a market with several multistate operators.
“Of the 20 licenses that they’re going to be giving out, 10 of those are going to be designated as social equity licenses,” Robbins said.
Additionally, all consumption-lounge applicants must provide a diversity plan with their application “summarizing actionable steps and goals for meaningful inclusion.”
“There are certain states like Florida and Nevada that really have not done quite enough in that regard. So I found that to be positive if nothing else,” Robbins said.