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Cannabis in hotels? Desert Hot Springs eyes cannatourism, tax changes to sustain growing industry

The next chapter of desert tourism could see travelers ordering a joint at their hotel as if it were a cocktail in the lobby bar.

Desert Hot Springs officials are moving toward developing “cannatourism” as they take a hard look at the future of the cannabis industry that’s become an anchor in their local economy. That includes considering the allowance of cannabis sales and use in hotels and entertainment facilities like bowling alleys.

They’re also carefully eying their tax rate on cannabis cultivators in an attempt to ensure they remain one of the most competitive cities in the upstart legal industry.

The city was one of the first in California to create a framework for legal operations, and it attracted a host of activity from the start. Cannabis has since become its second-highest revenue stream, bringing in about $3.2 million in the fiscal year that ended last summer.

At a time when 90% of California cities are considering layoffs and cutting services due to the coronavirus pandemic, Desert Hot Springs made some changes to its $23 million budget and ended this fiscal year in June with a deficit of about $350,000, which it covered with reserves, said Mayor Scott Matas.

So officials are proceeding with caution, and planning to collaborate with local cannabis experts as they map out the future of the industry that’s helped right their fiscal ship.

“We have to be able to market ourselves, but we have to balance those revenues coming in without losing too much, especially in this day and age with COVID,” Matas said.

What is cannatourism?

Cannatourism ⁠— or the concept of traveling somewhere to consume or participate in cannabis-related activities ⁠— is part of Desert Hot Spring’s cannabis strategic plan developed in 2017. Also known as “Spa City” for its mineral-rich hot water that’s an attraction at many hotels, the city was approached early on by hoteliers who wanted the option of providing cannabis to tourism, Matas said.

The concept came to its fullest fruition during a four-hour virtual City Council meeting on Tuesday, a discussion that had been put off since March due to the emergency circumstances surrounding the coronavirus pandemic. City staff had drawn up draft proposals for allowing cannabis sales and use at hotels, and at entertainment facilities.

Under the proposals, hotels would obtain a separate permit and have various restrictions and protocols like designated areas for smoking and vaping. On-duty employees would be forbidden from consuming on the premises.

Council member Russell Betts, who was concerned about taking business away from local dispensaries but saw the appeal of allowing guests to get something onsite, drew the comparison between a bar and a liquor store, where people consume onsite versus buying a product to take home.

“It’s just the same if you’re at a bar and have a $20 dollar drink and only finish half of it,” he said.

Representatives from the Coachella Valley Cannabis Alliance Network called into the meeting to urge officials to allow hotels to partner with already-licensed dispensaries.

“We would like this council to consider strategic partnerships with current retailers, as opposed to allowing new retail licenses to become present in every hotel,” said vice president Jocelyn Kane.

Kane also noted that it will be up to the hotels how to manage regulations with the state’s Department of Alcoholic Beverage Control, which said in a May 2019 guidance that alcohol and cannabis can’t be sold at the same location.

Other possible “cannatourism” rules in the Desert Hot Springs proposals include:

  • Having odor absorption ventilation so odor isn’t detected outside;
  • can’t provide free samples;
  • Hotels could only be open to guests aged 21 and older.

The proposal could also seek to limit sales to what could be consumed onsite by capping inventory and limiting displays.

Matas said that city staff will update the draft proposals and come back with fresh versions in the fall to incorporate new ideas. He said the idea is to “pre-plan,” so the city can ready itself for a time when a coronavirus vaccine is developed and people are traveling in bigger numbers again.

He said he’s wary of becoming “Cannabis City,” and wouldn’t want hotels to be able to put pot leaves on their signage, but is eager to see the plans develop.

“It’s an opportunity,” Matas said. “Taking that concept, and having (hotels) partner with our local dispensaries is only going to bring revenue up in the city.”

To Read The Rest Of This Article By Melissa Daniels on Desert Sun

Published: July 03, 2020

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