Hookah Lounge Business Overview
Hookah lounges, also called shisha bars or hookah bars, are venues where customers come to smoke flavored tobacco from a hookah, a traditional Middle Eastern water pipe, and are known for their relaxed, often trendy atmospheres. Customers can go to these lounges to smoke hookah with their friends, often all sharing a single hookah or hooking up multiple lines to a single hookah to smoke simultaneously. Most lounges provide a variety of shisha and tobacco with flavors like mint, fruit, and molasses.
The most common business models in the hookah lounge industry include:
- Traditional Lounge Model: Customers pay for individual or shared hookah sessions with flavored tobacco in a comfortable seating area
- Cafe-Lounge Hybrid: Combines hookah service with a full menu of food and non-alcoholic beverages
- Entertainment Venue: Offers hookah along with live music, performances, or other entertainment options
Related: Checklist To Start A Business
How Do Hookah Lounges Make Money?
The primary revenue stream for hookah lounges comes from selling hookah sessions to customers. The pricing structure typically includes the base cost of the hookah setup, which covers the pipe rental, initial tobacco, and coal service. Businesses often price their sessions by time increments, commonly hourly or in 2-3 hour blocks.
Each hookah can serve multiple customers at once, with many lounges charging additional fees per person when groups share a pipe. The tobacco flavors come at different price points, with premium or specialty blends commanding higher rates. Customers also pay for coal refills and additional tobacco as needed throughout their session.
Additional revenue sources these businesses might generate include:
- Entertainment Fees: Charging cover fees during special events, live music performances, or themed nights
- Food and Beverage Sales: Offering a menu of light snacks, appetizers, coffee, tea, and soft drinks to complement the hookah experience
- Retail Products: Selling hookah pipes, flavored tobacco, charcoal, and smoking accessories for home use
- Private Events: Hosting private parties, celebrations, and group gatherings with dedicated space and hookah service
- Membership Programs: Creating subscription-based programs where regular customers receive discounted rates and special privileges
Industry Statistics
Hookah lounges operate in the tobacco lounge and smoking establishment industry under NAICS code 713990, All Other Amusement and Recreation Industries. Here are some statistics about this industry.
Hookah Lounge Industry Size & Growth: The hookah lounge industry generated revenue of $192 million in the last year. Over the past five years, the industry experienced steady growth as social smoking venues gained popularity among young adults. The industry is expected to see a 6.6% increase annually through 2029, supported by rising disposable income and growing interest in social gathering spaces. (IBISWorld)
Number of Hookah Lounges: Currently, approximately 2,975 hookah lounges are operating across the U.S. The industry remains highly fragmented and is largely composed of independently owned establishments. (Rentech Digital)
Hookah Lounge Profit Margin: The average profit margin for hookah lounges ranges from 4% to 12% of sales.
States with Most Hookah Lounges: California, New York, Florida, Texas, and Illinois have the highest concentration of hookah lounges. These states contain large urban areas with diverse populations and higher consumer spending on entertainment and leisure activities.
Startup Stories
Costs To Start a Hookah Lounge
Starting a hookah lounge typically costs between $75,000 and $200,000. These costs include renovations, equipment, initial inventory, and furniture. There are several expenses to consider when starting a hookah lounge, but here are some of the biggest costs.
Location and Build-Out: A hookah lounge needs adequate space for seating areas and proper ventilation systems. Rent deposits typically range from $5,000 to $15,000, while renovations and ventilation system installation can cost between $30,000 and $80,000. This includes electrical work, plumbing, and building modifications to meet local smoking establishment regulations.
Furniture and Decor: Creating a comfortable atmosphere requires investment in seating, tables, lighting, and decorative elements. Quality furniture suitable for a lounge setting, including couches, chairs, low tables, and cushions, typically costs between $15,000 and $40,000.
Equipment and Inventory: Initial inventory includes hookah pipes, hoses, tobacco, charcoal, and cleaning supplies. A starting collection of 20-30 quality hookahs plus accessories ranges from $8,000 to $20,000. Additional equipment like tobacco storage units, coal burners, and cleaning stations adds another $5,000 to $12,000.
Point of Sale System and Security: Installing a POS system with inventory management capabilities, along with security cameras and monitoring equipment generally costs between $3,000 and $8,000.
These figures represent general estimates, and actual costs will vary based on location, size, and local regulations.
Resources:
National Association of Tobacco Outlets
Tobacconists Association of America