Grass and tree is dividing two hotels (7)
I believe the answer is:
hashish
'grass' is the definition.
(both can mean cannabis)
'tree is dividing two hotels' is the wordplay.
'two hotels' means two replacements for 'hotel'.
'tree' becomes 'ash tree' (ash is a kind of tree).
'dividing' means one lot of letters goes inside another (inserted letters divide the word).
'hotel' becomes 'h' (phonetic alphabet: alpha, bravo, charlie etc.).
'hotel' becomes 'h' (phonetic alphabet: alpha, bravo, charlie etc.).
'ash'+'is'='ashis'
'h'+'h'='hh'
'ashis' placed inside 'hh' is 'HASHISH'.
'and' is the link.
(Other definitions for hashish that I've seen before include "Hallucinogenic extract of hemp" , "Resinous product of hemp smoked as drug" , "Grass" , "Pot" , "Cannabis" .)