The inside story of Las Vegas’ first cannabis-friendly hotel

June 18, 2023 · Forbes

The new hotel in Las Vegas is already sold out.

Located just off the Strip, The Lexi was once the Artisan Hotel, which became famous among locals as a late-night hangout that hosted sex parties. But now, the 64-room, adults-only Lexi has officially become Sin City’s first weed-friendly hotel.

“It’s cannabis-inclusive, not cannabis-centric,” says Alexandre Rizk, the 44-year-old real estate entrepreneur who bought The Artisan for $12 million with a small group of investors in March 2022. The distinction is important to Rizk. The new boutique hotel will not sell cannabis and non-consuming guests will not be bombarded with pot smoke.

The Lexi opened in early June after Rizk spent around $3 million on renovations, which include a high-end air filtration system on the fourth floor – where all suites are cheekily numbered 420a, 420b, 420c – for accommodate marijuana-friendly rooms. Only paying guests – a suite costs between $180 and $400 depending on the night—with rooms on this floor can use cannabis. Smoking is prohibited in public areas, including in the swimming pool with the possibility of wearing bathing suits.

Upper Floor: Cannabis smoking is permitted on the 4th floor of Lexi, where each suite holds 420 people.

Ethan Pines for Forbes

As befits a new hotel in Las Vegas, the Lexi also pushes its luck when it comes to its weed policy — the property doesn’t have a cannabis-use license. The Lexis also couldn’t get one without changing the state’s cannabis laws, which prohibit dispensaries or other marijuana establishments from opening within 1,500 feet of a casino. (The Lexi doesn’t have a casino, but it’s this far from the gambling floor of the Palace station.) Still, it’s unclear whether the Lexi needs a consumer license to allow guests to smoke in their rooms.

Recreational cannabis has been legal in Nevada since 2016, but public consumption is prohibited, though a quick sniff along Las Vegas Boulevard would suggest otherwise. This means that buying pot is very easy for the 38 million tourists who visit Sin City every year, but finding a place to smoke legally is difficult.

Because marijuana is still federally illegal, every hotel-casino has banned cannabis smoking and licensed consumer lounges have been slow to open. So Rizk, whose company also owns the cannabis-friendly Clarendon Hotel in Phoenix, decided to turn The Lexi into a marijuana oasis in the Las Vegas desert. The only problem is that its business model is in an untested area of ​​Nevada state law.

“Everyone wants to be my lawyer,” Rizk says as he prepares to welcome guests to his property on the first day of June. “The thing is, it’s a gray area.”

Even state cannabis regulators admit that The Lexi’s plans fall into uncharted territory. “The Lexi does not hold any state cannabis licenses, including for a cannabis consumer lounge,” said Tiana Bohner, the responsible for public information Nevada Cannabis Compliance Council, said Forbes. “The CCB has not been contacted by The Lexi, and therefore we cannot comment on the legality of their specific business plans without additional information.”

The “grey area,” according to Rizk, relates to what is considered a private residence under Nevada law. “What happens inside a guest’s room is a question mark,” admits Bohner. Nevada state law defines a private residence as “any building, buildings, or part of a building owned or leased by a public or private entity that serves as a private, non-transitory residential dwelling unit.” These include single family homes, townhouses, duplexes, condominiums, mobile homes and apartments. But “private residences do not include hotels, weekly hotels, monthly hotels, motels,” according to the law.

The Nevada Attorney General’s office declined to comment on The Lexi’s bold business model. “Answers to these questions may constitute legal advice, which our office cannot provide,” said John Sadler, communications director for the Nevada Attorney General’s Office.

But Rizk is adamant: “We’re not breaking any rules.”

Despite his bet on cannabis, Rizk isn’t a likely candidate to open a weed-friendly hotel. He barely smokes weed, even though he lit up at Lexi at a celebratory dinner after buying the property. Rizk, who was born in Montreal and moved to Phoenix after serving eight years in the Canadian military, has spent the past 17 years in real estate, running his own hotel brokerage.

In 2016, he launched Pro Hospitality Group, a hotel investment firm that identifies an attractive property, raises money from a few investors for the down payment and renovations, and mortgages the rest. Rizk, which holds a 60% interest in each property, currently owns and operates 10 hotels, primarily in Arizona. PHG has raised about $30 million to buy hotels, and the company’s portfolio is worth about $110 million.

“By next week, we should be closing our first international hotel,” Rizk says, explaining that PHG is closing a property in Jaco Beach, Costa Rica.

Rizk credits the pandemic with inspiring him to operate two cannabis-friendly hotels, both of which are now part of Rizk’s pro-pot boutique hotel brand called Elevation Hotels and Resorts. In 2019, PHG purchased The Clarendon. “We bought it, remodeled it, and increased the revenue, all that good stuff,” he says of the downtown Phoenix property, “and kept the good reputation it had. But then Covid- 19 has arrived.

Sexy Lexi: In a past life, the property, just off the Strip, was known as a swingers hotel.

Lexi

The Clarendon has always been a funky place with electronic dance music deejays, drag shows and other events. But after Arizona legalized recreational marijuana in November 2020, Rizk believed making ownership cannabis-friendly would help attract more travelers and offset losses from closures. “We thought we could try to reclaim what we had before Covid with a new concept,” he says. “We started hosting upscale five-course cannabis-infused dinners on the rooftop, which we called Elevated Under The Stars, $250 per person.”

The Clarendon’s weed concept has brought its occupancy rate down to between 85% and 90%. And a new revenue stream: Cannabis brands, including local grower Mohave Cannabis Co. and former NFL running back Ricky Williams, the Highsman brand, are now paying the hotel to sponsor suites.

The Lexi is an important test for Rizk, which plans to expand its Elevation brand to Los Angeles, Palms Springs, San Francisco and Oregon.

The Lexi will never sell weed, but Rizk hopes to one day expand its cannabis offering to include a smoking room and host infused dinner parties in the space that was once the hotel’s wedding chapel. At Clarendon in Phoenix, guests can attend infused dinners, smoke a jay on the rooftop or in the members-only smoking lounge.

“Every city has different laws and different things they’re comfortable with,” says Rizk. In Arizona, where owners have the right to prohibit or allow cannabis use, The Clarendon can host cannabis-friendly parties if they don’t serve alcohol. “We’re sailing in Phoenix, but Vegas doesn’t allow it yet – they’re very specific about it and we’re obeying,” he says.

Of course, in Sin City the rules are always a bit loose, especially at Lexi’s on West Sahara Avenue along the Las Vegas Freeway. In 1979 the hotel opened as a Travelodge, but in 2001 a new owner renovated it and renamed it The Artisan. In 2008, the four-story hotel was heading for bankruptcy, and the mortgagee bought it a few years later. It quickly gained a reputation as a freewheeling place for locals, where management ‘turned a blind eye’ to drug use, says a local entertainer who used to attend late-night parties at The Artisan. Groups could also rent the whole place for less than $10,000 and The Artisan became known as a swinger hotel – or in preferred nomenclature, people watching “the lifestyle”. Rizk says that when he tells someone who knows Las Vegas that he owns The Lexi, they invariably tell him that they had the best night of their lives at The Artisan. “It was known for its crazy, wild parties,” Rizk laughs. “He had a reputation.” Eventually, however, the sleazy strategy failed and that’s when Rizk made his offer. He doesn’t want history to repeat itself.

The US hotel and motel industry generated $225 billion in revenue in 2022, according to a report by IBISWorld. And Rizk thinks cannabis-friendly hospitality models could eventually make up 5% of the industry, or about $11 billion. Properties like The Lexi are also trying to secure a share of the US cannabis tourism market, which is estimated at $17 billion.

Currently, most cannabis hotels are of the bud-and-breakfast variety — quaint mom-and-pop establishments. Denver’s Patterson Inn is trying to open a smokehouse in hopes of becoming a cannabis retreat in the already mile-high city. But for the most part, hotels aren’t hip when it comes to pot. For Rizk, a wide open industry is an opportunity.

“I’m going to be as aggressive as possible,” he said. “My goal is to get between five and six hotels, with the same concept under Elevation.”

Eventually, when cannabis becomes federally legal, he plans to franchise the brand. “I want to be the Kimpton of cannabis,” he says, touting the hip hotel brand. “Some hotels like The Lexi will be party zones, but we will also have nice boutique hotels on the coast, where there will be very few parties, but the guests all have nice rooms and people can smoke while watching the sunset.”

For now, Rizk says his competition is small freeway motels that allow smoking — which he scoffs at as “shitty places” or “hippie retreats” in the woods. What if Rizk’s cannabis vibe turns off too many guests? “If that doesn’t work out,” he says, “we still have a lifestyle boutique hotel in Vegas that we need to take care of and we know how to succeed in that area.” (Full Story)

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