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AUTHOR: Heather Allman

PUBLISHER: CANNABIS LAW REPORT

 

Interview With Canna Advisors Regarding Cannabis Tourism in the United States

 

With new cannabis markets emerging across the United States, many are wondering what this means for cross-border cannabis tourism, and whether or not we’ll see a new wave of restrictions like those popping up in Amsterdam—where tourists are facing bans from cannabis cafes. 

According to the February 2021 edition of Marijuana Venture magazine:

“In Colorado, with the snow comes the tourists. And with the tourists comes the customers…. At Sweet Leaf Pioneer in Eagle, located right near the airport about 15 minutes outside Vail, business increases by 50% in the winter as throngs of people make their way to the mountains. And depending on tourists means doing things just a bit different, even in cannabis retail, from product selection to budtender training to merchandise. Co-Founders Dieneka and David Manzanares say they have to stock more pre-rolls and other portable, ready-to-use items for customers on their way to the ski resorts.”

Canna Advisors is committed to seeing clients succeed and to building the industry. Helping new businesses launch and established businesses grow, they have the ability to be an investing, advocacy, and mentoring partner in the cannabis industry.

They help cannabis entrepreneurs win business licenses, optimize facility design, standardize operations, and maximize business development. No matter the task, this team are passionate about making cannabis the next great American industry.

For insider insights on this front, Cannabis Law Report talked with Jay Czarkowski, Co-Founder of Canna Advisors, one of the country’s most renowned cannabis business consultancies:

Jay Czarkowski, Co-Founder of Canna Advisors

 

—And with Greg Huffaker III, Director of Client Services:

Greg Huffaker, Director of Client Services at Canna Advisors

As the backbone of Canna Advisors, both experts are well positioned to discuss this growing issue of cannabis tourism. 

 

Cannabis Law Report: At Canna Advisors, you’re kind of a full circle company. Tell me a little about how you got started in the investment side of cannabis.

Jay Czarkowski: I focused on real estate and cultivation design for 12 years, in addition to being an entrepreneur in this space. My wife and I, as we began to make money in the industry, we’d always be pushing those chips back in, not just on the advocacy side, but on the investment side. We’ve invested directly in a number of companies and we’re just all about it. We’re all in on cannabis, and clearly, the industry is still in its infancy. We have a long way to go.

 

TOPIC — How did you choose to focus on the cannabis tourism market?

Cannabis Law Report: How and why did you get started in cannabis, then cannabis tourism?

Jay Czarkowski and Greg Huffaker: We speak with a lot of regulators at hearings and submit public comments and things like that, we have team members who have come from the direct cannabis tourism industry, and we also advise some clients on how to set that tourism division up. 

I think a really great place to start talking about cannabis tourism is to work on the definition of it because “cannabis tourism” means a few different things, and there’s several interesting factors to it. 

First, it is literally people coming to a state because they know there’s adult-use cannabis here. We saw a huge boom in Colorado where we have a lot of people that weren’t coming for the purposes of cannabis, but they were coming on their ski trip.

Between Utah and Colorado, we saw people start choosing Colorado because they knew adult use cannabis was legal. So, the first bucket is the general knowledge of an adult-use state.

Then, people visiting for general tourism is the second bucket to talk about, the people who specifically cross state lines for the purposes of obtaining cannabis, and then immediately return to their home state. 

The third bucket is the businesses themselves that really support the idea of going somewhere for the purposes of cannabis. So we have clients who will build, for example, their cultivation center with the plan of being able to give tours. 

Therefore, it’s very important that cannabis is really clean and safe because you can’t have members of the public coming in and out of a room every day and experiencing pest issues and other things like that. But you can smartly build the building, so that the pests are never interacting with plants, and that potentially, employees using plant flow have a totally separate flowchart through the building, then do tours. 

The other kind of tourism stuff we’ve worked on is with our groups, like hotels that we want to cater to, like bed and breakfast companies that have buses and transportation options so that people can safely get around safely while high. 

I would say cannabis tourism sort of falls into those three buckets.

 

 

TOPIC — How does cannabis tourism affect local economies in the United States?

Cannabis Law Report: I actually am very intrigued by all of them. Let’s talk about the first bucket, the tourists that come to the states specifically because they have researched and know that it’s an adult use state.

Jay and Greg: Yes. So, this is something that gave up a boon to our economy when we first opened here and even though adult use happened at the same time in Colorado and Washington, they are still operating in very different ways, to the point that Washington really never saw the type of enthusiasm and launch that Colorado did. 

Part of that is regulators, where they get placed, or where regulation gets placed, all of which can have a real effect on a program’s rollout, and how much they’re willing to interact with Colorado has been handed to the Department of Taxation where the goals are revenue. So,  in Colorado, they were very business friendly, working to get businesses open quickly. In Washington; however, it was placed with the liquor board who didn’t seem particularly drawn to trying to get it off the ground. 

The news stories that were coming out at the time hit the national scope. For example, if there were problems with Washington, you’d be lucky if there an answer at all. In Colorado, it was “look at this; it’s cool. Look at that, cool.”

So, journalism is required, essentially, for the overall cannabis tourism, to work. And as we think that’s the origin, as we’ve seen it grow here, and other states also legalized, and the starter states lose the sort of special thing they had going nationwide. 

Colorado entrepreneurs are still learning away on creative new ideas for cannabis consumption. For example, there’s a dude ranch in Colorado that caters to cannabis consumers specifically, and it charges a much higher price because of that. And we were one of the first places to pass adult use public consumption spaces in Colorado. COVID has created a sort of failure to launch there, but we’re trying to work on that. 

 

Cannabis Law Report: I think that’s really interesting because those two markets are very different for that reason, and also interesting in the way they made cannabis be regulated by different departments. Of course being in Florida, we’re having lots of interesting discussions between the Health Department and the Agriculture Department, because they don’t know where to put anything new that’s cannabis-related.

Speaking of that, then, let’s not move on to that second bucket — those are the people that come to the state to purchase cannabis, and then immediately return to their home state. How has that bucket grown more since COVID than the public cannabis spaces in that first bucket?

Jay and Greg: Cannabis showed itself in 2020 to be a recession-proof commodity. That was seen previously as anecdotal data, and COVID was the best evidence of that. Trinidad, Colorado is on the Southern border, it used to be the gender reassignment surgery capital of the world, and that moved on. Now, it’s cannabis dispensaries everywhere in that little town. 

That’s because Texas, Mexico, and Arizona, or the East half of the state at least, are driving into Colorado for the purposes of obtaining cannabis and turning right back around. That’s a long drive for some of those folks. 

What we’re seeing unfold in the East Coast, and I don’t know if you saw in the last hour or so that Murphy finally signed the NJ  cannabis bill this morning that makes underage drinking and cannabis violations have the same consequences. Now, underage drinking, underage cannabis, and no arrests. So it seems like the best solution for everybody, in all honesty. 

In New York City, the PATH train is about to see a 500% increase in ridership. Manhattanites are going to start flocking to Jersey where cannabis will be legal, and they’re dissenters. As we’ll also see with the residents of Connecticut and Pennsylvania, unless one of those states can beat New Jersey to be open first for cannabis business.

Cannabis dispensaries require very sticky business and marketing, meaning that the first dispensary you go to, you tend to keep going to it, even if one opens up closer to you or that is cheaper, right? So we’re talking about hundreds of millions of dollars in both revenue for your state citizens and also tax dollars they’re spending in your state. 

And right now, Massachusetts has been raking that in and their stores continue,  in Western Massachusetts, to have long lines and high prices. That’s going to start to erode very quickly with other states getting set up.  Even today, I have a friend who owns a dispensary in Portland. The majority of his customers are not Oregonian, they’re from Washington, because the taxes are so much higher in Washington that it makes sense, even when it’s legal in your state, to drive to another state, commit a federal crime to bring it back across that border, then the vendor pays the higher taxes rather than the customer. 

 

 

TOPIC — Your thoughts on legislation that could come to deter or, rather, increase the practice of inter-state cannabis tourism?

 

Cannabis Law Report: right, I tend to agree with you 100% so let’s talk about that a little before we move on to that third bucket. What kind of legislation are you seeing that could come soon to deter or increase that practice of interstate cannabis tourism that you’re talking about — whether it’s in that first bucket or the second bucket?

Jay and Greg: Yes, I want to tell you a funny anecdote that I was part of here in Colorado, where we had a client call us up and say somebody from out of state wants to buy some clothes, can we sell them those clothes?

I checked in with the state and talked to them and the answer was “we never thought about that, so we better pass a regulation to ban that for now. Could you just try not to sell the clothes. It’s not illegal, but we prefer it if you don’t.”

 

Cannabis Law Report: That’s definitely not something they thought about at any point.

Jay and Greg: Yes, and the car gets pulled over the border of Kansas or something, and it’s got a backseat full of plants that all has the metric, the tracking numbers back to the store. 

That’s going to be a problem for the store. 

So, in addition to it being a problem for the state, if the state can create some protectionist things for their own citizens by not allowing home sales, that also has to be counterbalanced against the interest of does that just keep an illegal market alive for clones or anything like that, right?

As you know, the sale of clones is a difficult thing, and as part of this larger conversation of “do we allow home grow and what type of restrictions we put on here,” but it doesn’t change that factor.

Ultimately, you want your businesses to be able to sell as much as possible, and that includes out of state people, but I think regulation exists to some degree there to keep bumpers on protecting people from themselves. Additionally, clones are sort of the easiest thing to have that conversation about.

 

Cannabis Law Report: Yes, because clones are something that’s always been a little bit out of the picture and somewhat marginalized in legislation, like nobody considers the plant itself. We all forget about the actual plant itself.

Jay and Greg: Yes, and have you heard the one about immaculate germination? You know, it’s that the regulations are written so that it’s called “seed to sale” tracking, but it’s not. It’s when the plant is six inches or 12 inches high tracking.

That means that genetics can magically appear in the facilities and there was no legal way for it to get there. 

It’s like a fine, short term Band Aid, but is that really how we want the federal system set up? Eventually we are going to want to control the genetics, from the point that it’s in a petri dish.

Have you ever seen a serious strain library and cultivation operation?

 

Cannabis Law Report: Yes, they’re cool, but they’re most definitely intimidating.

Jay and Greg: Yes, they are. That intellectual property is the most valuable thing, and I build often, and so those people are going to want their own protections about it too. But you have to tackle both questions at once. 

If we’re going to allow genetic live plant sales. How do we do that in the right way, and as I was saying, we want to encourage  and I mean encourage everybody to get as many steps as possible and what regulations do. But then suddenly, we start bumping into these issues.

We saw that when we put a limit in play on a sale. But the stages, and then tracking the individuals: it creates an incentive for bad actors to profit.

 

 

 

TOPIC — What could federal legalization mean for the cannabis industry across markets, and the nuances involved with local and state governments?

Cannabis Law Report: What does federal legalization means for the cannabis industry across those markets, and the nuances involved with the local state governments? 

There are several new states who passed cannabis legislation in November 2020. What could federal legalization mean for the cannabis industry in reality?

Jay and Greg: Federal legalization does a couple of things. Number one, it makes interstate commerce a practical thing. Now interstate commerce will still be regulated by the states even if the federal government says okay cannabis is legal. It doesn’t mean that New York State will allow a New York dispensary to sell cannabis from California, but it makes it possible. 

Next, it takes away the fact that it’s a federal crime. Right now, if I have a product in Colorado and I want to sell my product in Arizona, I have to go to Arizona, try to get a license, try to make the product there under a completely separate set of rules sometimes, for packaging and manufacturing and dosing.

All that nonsense goes away with federal legalization, and I think that’s going to be wonderful for the industry, as we could finally have interstate commerce. 

The other thing is as the industry stands currently, it allows us to stake our rightful place as the global leader in cannabis export. Right now, Canada, where cannabis is legal both medically and for adult use,  the Canadians are able to export cannabis all over the world. 

You know what though? Your cannabis stinks, Canada. The fact that the Canadians are taking the lead on the global stage is embarrassing to me, quite frankly, because the U.S. based companies are clearly bigger companies, better, more confident, and they have more expertise because they know what they’re doing. 

So federal legalization is going to allow for us to claim our space as the global leader in this industry.

 

Cannabis Law Report: I agree with that 100%, because I know that the quality of what comes out of Canada cannot compare to what is available in America.

Jay and Greg: Exactly.

Cannabis Law Report: And I think moving forward. You’re right in saying that legal interstate commerce is key because without that, we can’t have any kind of leadership role in the global economy because we aren’t even recognizing this as an official industry. 

What kind of clients have you guys gained since COVID started and consumer behaviors changed and business changed? What type of differences and evolutions have you seen at Canna Advisors?

Jay and Greg: I’m not sure that anything’s changed. Actually, it’s surprising how little it did change.  We  helped people in the beginning with how to create curbside methods and the transition to remote work.

Personally, we’re used to working with clients all over the country over phone calls, so we were lucky based on a lot of other reports from businesses. We have had very little interruption. 

And our clients plan for the future so they know that this is a storm of weathering, and the sheer and utter optimism, particularly since the election, in the industry with our clients has made a really fun environment to work in.

 

Cannabis Law Report: I would think that’s probably true because looking at your brochure, the way that you have pretty much the full circle of services, or this full spectrum of brand development to business development to startup to licensing. I can see why cannabis was considered an essential business during this pandemic.

 

 

 

TOPIC — Your thoughts on the possibility of widespread cannabis legalization could roll out in the next few months?

 

Cannabis Law Report: Let’s talk about how widespread cannabis legalization can roll out in the next few months.

What are your thoughts on what’s gonna to be happening in the next year, this new year with the trifecta we have occurring with the Democratic House, Senate, and the Presidency?

Jay and Greg: At the federal level, They aren’t a problem. Vice President Harris’s statements show that they need to evolve their thinking and specifically Biden, who talked about “we shouldn’t have people going to prison anymore, we should have mandatory rehab.” I very much disagree with that. Next, they said, “rescheduling” which again, I disagree with the fact that rescheduling or de-scheduling are the only choices.

I think that they’ve shown themselves very open to evolving and learning on a variety of topics. I think this is going to be one of them.

I think it’s probably going to be piecemeal:

  • The first thing we’re going to see is probably the Safe Banking Act or some version of that. The industry is such a headache with banking right now; you can still get banking, but it’s pointless.
  • The next thing we may see will be getting rid of 280E, which creates an enormous additional tax burden. 
  • Then, I think we’ll see expansion of research as part of a legislative solution —not just what you get from bumping around with the DEA, who clearly needs to get pretty far away from this, in my opinion. 
  • Finally, we’re going to see more regulation come out around CBD from the FDA, and we’ll see if the legislative powers-that-be decide to offer what comes out from the FDA. My guess —and I hope I’m wrong about this— is that we wouldn’t see any serious level of federal legalization until 2022, prior to the midterm. 

I hope I’m wrong, but I know that our federal government has a lot of big crises to solve, and I’m not hearing this one come up a lot as a big issue right now.

Adding safe banking and increasing research, though, would be real substantive and helpful changes to the industry. 

I think what we’ll eventually see, with full legalization, is that it would still be up to states to decide. Cannabis businesses being allowed to sell across state lines would be a real game changer indeed. But, a lot of people that are too afraid to touch cannabis right now, so the more federal legalization you see the better at the state level. 

I think we’re going to see the busiest year ever for adult use. We’ve got Arizona and New Jersey, as I said earlier, New York’s probably not far behind. Connecticut is a sleeper.

There is  some rumbling in Virginia and they are making better progress than I really hoped at this point, Pennsylvania’s got a tougher road I think than a lot of people say, but we’ll see if they can talk that legislature into it.

 

 

TOPIC — Your thoughts on the federal legalization issue?

Cannabis Law Report: I would agree with those state predictions, as far as that goes, but what about federal legalization?

Jay and Greg: If there’s some type of federal legalization that happens, it’s important to understand that it doesn’t change anything, at least not immediately.

You wake up the next day and it’s great that cannabis is no longer federally illegal, but it really doesn’t doesn’t change anything.

It’ll still be up to the individual states to build their programs, to make their rules, but at least give the states competence that they don’t have to worry about doing something that’s against federal law. 

It would certainly go towards fixing all the financial issues. It’s real. A lot of cannabis businesses have banks, maybe half of them have banks at this point, but the credit card processing is a pain in the ass. I just read a story today about how the EAZE CEO just pled guilty to bank fraud and there’s a trial for two more of the executives coming up. There’s all that nonsense.

So hopefully, with federal legalization, that stuff starts to go away. As does the whole 280E tax issue where the IRS is taxing dispensaries like they’re drug dealers, all of that nonsense that I’ve been having to put up with for 12 years now. I’m looking forward to that. All of that being a thing of the past.

 

Cannabis Law Report: I think you’re exactly right. The tax issue is the huge burden on an essential business right now, and the banking. I agree wholeheartedly, though, that the way forward will be somewhat piecemeal, with the states out of the red tape so that they can set up their regulatory frameworks accordingly.  

As far as interstate commerce, and the local economies, how do you see the legalization —and whether it’s state by state or whether it’s federal— how does that affect and really add to the value of local economies?

Jay and Greg: In a whole number of ways. I think that Colorado’s industry began to blow up in 2010 to 2012. It was right after the Great Depression when all real estate prices were in the tank.

There was lots and lots of commercial real estate available in Denver, really across the front range of Colorado. And at the end, it gets snapped up and the market becomes hot because people don’t have these grow operations that are required. At the time, indoor space. So it’s a big boon to real estate. 

It’s also a drop crater, not just for growing it and selling the dispensaries, but the electricians, the plumbers, the drywallers, all of the construction trades and finished trades that go towards building.

Let’s pick New Jersey. There’s going to  be millions and millions of square feet required of infrastructure to support that, and just multiply that across multiple states. It’s a lot of square footage. 

Then there’s all the professional trades: attorneys, CPAs. It goes on and on and on, and politicians are certainly fooling themselves if they think they’re doing their state of favor by keeping it illegal. All they’re doing is guaranteeing that their population is maybe getting contaminated products from the rampant black market. I think we all share the same philosophy here.

 

 

TOPIC — Your thoughts on the issue of cannabis tourism bans and restrictions?

Cannabis Law Report: If this all plays out the way that we’re talking about in this phone call. I know there’s issues in Amsterdam right now where there’s a lot of tourists based in bands, you know from cafes and things because they’re not residents.

We know there’s not a lot of states medically that have reciprocal programs; for example, I was just in Maryland, and I can’t use my Florida card in Maryland. So where do you see that going as far as that third bucket: the businesses that you serve that are really getting involved in cannabis, as a tourism business — because it’s booming. What good and bad do you see in that?

Jay and Greg: Great question. So, the total US cannabis market that promises to get back to your question is about the size of the total US dairy market. 

And I think that’s a good way to think about where we will see cannabis in about 20 years, there’ll be some people who are passionate about cheese right there’s a cheesemonger’s shop. And most people I think will have some version of cannabis in their house, just like some version of dairy.

We see that there’s wine and paint classes, right, where you can go to a farm and make your own goat cheese. There’s going to be more and more niches, as we allow these tourism businesses for people to create better experiences for their customers by bringing cannabis and as part of that. 

So cannabis yoga classes are already starting here, and I think that that is going to be in every town, with 20,000 people or even bigger than that in 20 years, because it’s nice to get high and do yoga. For the people who are “the more you know” kind of people, the extreme people who want to go make their own goat cheese, I think we’re gonna see a growth in that type of tourism: to go stay at a cannabis farm for a treat. 

You know places where there’s going to be growing cannabis, like Humboldt, like nice spiritualism classes and tie it in with a plan that involves cannabis.

We’re already seeing this with dispensaries where all the dispensaries don’t look the same, right? A place like Denver, here you can go into what looks like an Apple store, or one that’s a mile away that looks like a pretty crummy liquor store. They’re attracting different sectors of the market because they’ve been able to diversify and that’s just going to grow in spades into tourism.

I think you’re gonna see some things that are an afternoon experience, like instead of a wine and paint class is that cannabis and paint class, and you’re gonna then see the other side of it, like a river trip, a three week river trip or something, where they’re guaranteeing cannabis the whole time and guaranteeing the safety around that for you, which means people probably having to pack in their own cannabis and food and stuff like that.

So there’s enormous growth potential, and really allowing the best of American capitalism to grow a new way. 

But I think a lot of the tourism is going to be more of that add-on stuff. And I think cannabis tourism is going to be existent but more of a niche for the, “I want the reason for my trip to center around those things I talked about” . We help clients with building out the facilities with tours. I think that’s going to go from a special rarity to a significant minority.

And that people who really want to get into the cannabis industry are probably, right now, calling somebody like me and paying hundreds of dollars to learn.I think there’s going to be tourism around it — fly out to our three day business class and cannabis. 

 

Cannabis Law Report: I agree. I could totally see cannabis and massage, or why not couples cannabis massage? Plus, cannabis is much easier to take down a river than a bunch of beer. So as a tourist and someone who has camped and traveled across the United States, I can say: it would have been wonderful to always include cannabis.

Jay and Greg: You can pick up private campgrounds that not only allow cannabis, but create a community. One of the best things about cannabis is the use of the term and when you can see how cannabis book clubs are becoming very popular right now.

There’s so many experiences that can be enhanced by cannabis. And I think tourism is ripe for combining that because of the recreational inherent element in tourism. Yes, so much opportunity for entrepreneurs over the next decade.