What Happens in Vegas: Nevada’s Cannabis Tourism Industry

- November 15th, 2018

Nevada’s cannabis tourism industry is the perfect marriage of two of its strongest profit-making markets.

Nevada’s cannabis tourism industry is fuelling the success of one of the “gold standards” for legal cannabis jurisdictions in the United States.

Nevada can thank its thriving tourism industry for its leader status which will largely be driven by the newly legalized adult-use market in the world’s premiere entertainment destination. The legislation has proven to be a huge opportunity for the state’s most famous city, Las Vegas—poised to become the world’s largest adult-use cannabis tourism industry.

While cannabis consumption remains a no-go at the Federal level, that hasn’t stopped the growth of the state-legal cannabis industry. In fact in 2017, according to a recent report by Arcview Market Research and BDS Analytics, the US cannabis market grew by 31 percent to reach $8.5 billion. As more states legislate for medical-use and adult-use cannabis programs, that figure is expected to hit $11 billion in 2018 and $23.4 billion by 2022, representing nearly three-quarters of the global legal cannabis market. Within that scope, Nevada is set to be a big player in the US legal cannabis market.

This INNspired Article is brought to you by:

1933 Industries Inc. (CSE:TGIF, FWB:1QF, OTC:VPGDF) owns and controls cannabis- and hemp-based assets in Las Vegas Nevada. The company is a licensed cannabis producer building a vertically integrated model to serve multiple facets across the value chain of both the medical and recreational cannabis markets in North America.Send me an Investor Kit

Nevada’s legal cannabis market

Nevada became the fifth US state to legalize adult-use cannabis in July 2017 when it added recreational use to its existing legal model for the cultivation and sale of medical cannabis. While the state’s card-holding medical cannabis consumers—the number of which has been dropping steadily since recreational legalization—need only be 18 to purchase products, recreational consumers must be at least 21. The new recreational laws allow adults over 21 to purchase and possess up to one ounce of cannabis dried flower or 3.5 grams of concentrates or hash for personal use.

Nevada is home to 64 state-licensed dispensaries, as of August 2018, 61 of which are licensed for recreational sales. The number of retail stores allowed in each Nevada county will be population based, with initial estimates projecting around a total of 130 licensed dispensaries statewide in the future. Proceeds from the 15 percent cultivation tax on all cannabis products in the state goes toward schools, and a 10 percent tax collected from recreational cannabis sales goes toward the Nevada Rainy Day fund. In its first fiscal year, the Nevada Department of Taxation reported a remarkable $69.8 million in cannabis tax revenue, which is 140 percent higher than anticipated. Recreational cannabis sales accounted for 80 percent of total sales, raking in $424.9 million for the first year.

“Even though Nevada was an early adopter in creating its state-legal cannabis industry, it has one of the most robust regulatory regimes. The laws are clear, the Department of Taxation enforces them, and licensees who are out of compliance are shut down,” Brayden R. Sutton, President and CEO of vertically integrated Nevada-licensed cannabis producer 1933 Industries Inc. (CSE:TGIF,OTCQB:TGIFF), told the Investing News Network. “In comparison, California’s non-compliant operations are still thriving. From the beginning, Nevada issued a limited number of licenses based on its supply and demand projections. Currently, no new cultivation and production licenses are being issued. This offers protection to current cultivation and production licensees by avoiding excessive competition.”

Keeping the number of licensed producers in check has also kept Nevada’s supply levels in check, leading to a more sustainable market. The state does not have an oversupply problem such as Oregon is experiencing. This has in turn kept the price of cannabis flower and other cannabis products fairly stable, allowing for more accurate projections of gross revenue and net profits for the Nevada’s cannabis companies. Unlike Washington and Colorado, Nevada allows non-residents to invest in and have ownership in cannabis businesses, which allows for increased investment into the industry.

Success in implementing legalization

In April 2018, the US’ largest cannabis company, Los Angeles-based MedMen (CSE:MMEN) announced the completion of “the most high-tech marijuana factory in the world”, a 45,000-square-foot facility east of Reno, Nevada. “There’s no better place that we could’ve built this factory than right here,” said Adam Bierman, MedMen co-founder and CEO, praising Nevada’s cannabis industry as “the premier marijuana program in the US right now.”

According to New Frontier data, cannabis consumers in Nevada spend an average of $68 per transaction at least once per week. The research firm also notes that annual sales of cannabis at Nevada’s state-licensed dispensaries are projected to grow at a CAGR of 22 percent to reach an estimated $772.3 million by 2022.

“People think of Colorado as the gold mine so to speak. We are way beyond what Colorado did the first year,” said State Senator Tick Segerblom (D), who was instrumental in developing the state’s medical cannabis framework in 2013 as well as legalizing recreational marijuana sales.

Segerblom credits Nevada’s ability to implement recreational legalization quickly compared to other states on the fact that Nevada’s medical cannabis program was modeled on Colorado’s recreational program, “[W]hen the voters approved Question 2 we only had to flip a switch to convert medical to recreational. We also have a very dedicated industry and a talented group of civil servants who labored hard to create a rigorous but workable system that got off the ground quickly. There are a lot of rules, but the rules have helped ensure we have a good system and a working market.”

Nevada’s well-established and world famous tourist industry offers the state’s emerging cannabis industry another advantage over its peers—one that industry leaders and analysts say doesn’t yet factor into the nearly half million dollars in cannabis sales realized in the market’s first fiscal year.

Nevada’s cannabis tourism industry key to market growth

Nevada is home to two prime tourist destinations, Reno and the world’s premiere party city, Las Vegas, making the state an obvious match for the recreational cannabis market. “Unlike all other states, Nevada is unique in that it has a high-spending tourist consumer market who come to Las Vegas to seek relaxation and entertainment; the ideal target customer. With more than 50 million tourists traveling to Las Vegas each year, there is enormous potential for Nevada to become the world’s top canna-tourism destination,” said Sutton, whose company owns Alternative Medicine Association, one of the state’s first licensed cannabis producers and now a licensed seller of well-established cannabis brands. Construction is underway on an additional 67,750-square-foot cultivation facility in Las Vegas.

“The City of Las Vegas is looking to implement consumption lounges in the next few months, which would be an even bigger attraction for tourists to consume cannabis products while staying here,” he added.

Cannabis lounges to provide legal consumption venue

Nevada’s casinos and associated hotels are federally regulated, making them off limits for cannabis consumption. However, the Las Vegas City Council and other local governments are considering licensing cannabis consumption lounges. The move could provide the room for significant growth in Nevada’s already impressive recreational cannabis sales by attracting additional tourists and providing them with an entertaining venue for legal consumption in the heart of Sin City.

“[T]he fact is when you talk to people we really haven’t attacked the tourist market, it’s really more locals so if we can get that 50 million people that are coming here every year than watch out,” said Senator Segerblom, who believes that Nevada will have its first cannabis lounges in 2019. “We’ll also have cannabis health spas where you can do yoga and pilates and have massages, and hopefully not long after that have cannabis events and festivals. Las Vegas is working on legislation for that now. I’m seeking election to the county commission and want to make this a priority at the county level as well. This is one of the next big steps for the industry.”

Takeaway

Nevada’s largest city and one of the world’s top tourism destination, Las Vegas is on its way to becoming the mecca of North America’s cannabis tourism industry. What happens in Vegas doesn’t always stay in Vegas. Investors in Nevada’s cannabis tourism industry and cannabis companies have plenty of opportunities to take home profit.

This INNspired article is sponsored by 1933 Industries Inc. (CSE:TGIF, FWB:1QF, OTC:VPGDF). This article was written according to INN editorial standards to educate investors.

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