We’ve mostly talked about buying residential property in Thailand previously, covering foreign ownership regulations, taxes, and more.
In this article, we take it to another level and check how it works when buying hotels and resorts.
Buying a hotel is in a different league as these properties are treated as businesses, hence, different regulations apply. The transaction values tend to be higher as well.
Yet, buying a hotel in Bangkok or Thailand’s most popular resort areas can result in great capital appreciations and high yields.
In this article, you’ll learn how it works when buying a hotel or a resort in Thailand and regulations that apply.
Laws & regulations to foreign ownership of hotels in Thailand
Buying a hotel is a completely different undertaking compared to buying residential real estate in Thailand.
Getting your feet wet, working with a serious agent, and a reputable solicitor from the start shall be a top priority before engaging in the market.
When it comes to Thai laws, there are multiple regulations that affect not only you as an owner, but the building itself, the business, management, and more.
The most frequently mentioned law is Thailand’s Hotel Act 2004, that stipulates your rights as a foreign hotel owner in Thailand.
Thailand’s Hotel Act 2004
The Hotel Act 2004 explains that companies providing paid accomodation for less than 30 days operate as hotel services.
Thus, a simple thing as renting out a condo unit can fall under the definition of being a hotel service. If you check Airbnb in Bangkok, you’ll see that there are plenty more options available if you input a tenure longer than 30 days.
This is mainly done by individual condo owners as a protective measure. In reality, many of them don’t really know what regulations that apply in detail.
Worth mentioning is that some projects and buildings are exempt from the law. In short words, it includes information and regulations related to how many rooms you have on each floor, for example, which can give you exemptions.
The Foreign Business Act (FBA)
To buy and run a hotel lawfully, you need to comply with the Foreign Business Act (FBA).
It was issued a couple of decades back and includes three different lists, each showing business activities where foreigners can participate.
Running a hotel is specified in the 3rd list, which means that you need to have a Foreign Business License. The reason is, as stated, that “Thai companies are not yet ready to compete with foreign commpanies in the industries listed.”.
Falling into the third list means that you need a minimum capital of around THB 3 million, which is higher compared to the two first lists.
Getting a Foreign Business License (FBL)
You can get a Foreign Business License from the Department of Business Development, but the application period can take a bit of time.
To avoid the lengthy registration process, many foreigners decide to open a company together with Thai nationals, owning less than 49% of the shares of the company.
In this case, you don’t need to apply for a Foreign Business License as the company is considered to be Thai.
Still, foreigners can be majority shareholders of companies for hotels in specific areas and projects.
Your lawyer and agent can help you to confirm whether this is the case for you or not.
Exemptions to apply for a Foreign Business License when buying hotels
There are some exemptions that can help you to avoid applying for a Foreign Business License.
One of them is the ‘Treaty of Amity and Economic Relations between Thailand and the US’.
Shortly explained, the treaty was signed in 1966 and allows American citizens and businesses, incorporated in the US or Thailand, to have a majority of the shares or to fully own a company in Thailand.
Thus, if you’re American, you can do business on the same basis as Thai citizens.
Thailand’s Board of Investment (BOI)
BOI can give you exemptions and allow you to manage your business in Thailand at the same time as you’re a majority owner of the shares in your Thai company.
This is sometimes based on a project level and decided by the BOI.
Those BOI-promoted companies do not need to comply with the Foreign Business Act, or apply for a Foreign Business License.
Other licenses needed when buying and running a hotel in Thailand
On top of the Foreign Business License, you need to get a number of other licenses. The size of your hotel and operations will determine which licenses are needed.
Some examples of licenses are:
- Licences for the hotel business
- License for the restaurant business
- License for the seminar rooms
- License for the entertainment offered
- Liquor and tobacco licences
As explained by Siam Legal: “any hotel that has more than 4 rooms, or may accommodate more than 20 guests, must obtain a hotelier’s license from the Department of Provincial Administration for hotels located in Bangkok, or from the Provincial Governor’s Office for other areas.
Hotels that provide catering or restaurant services must obtain a Permit for Selling Food, Liquors and Cigarettes.”
Types of Hotels in Thailand
So, the licensing needed depends on what kind of hotel operation you run, and how big it is.
In Thailand, hotel businesses are divided into five different types, as listed below:
Hotels which are exempted from certain requirements, including the need to obtain a hotel business license.
Hotels providing accommodation only, the number of rooms does not exceed fifty, the size of each room is not less than eight square meters.
Hotels providing accommodation and catering or restaurant services, the size of each room is not less than eight square meters.
Hotels giving accommodation, catering or restaurant services, the size of each room is not less than 14 square meters, and which has either conference rooms or entertainment venues which under the Place of Service Act could be a place for dancing, bars, and nightclubs or spa.
Hotels providing accommodation, catering or restaurant services, conference rooms, and entertainment venues, the size of each room is not less than 14 square meters.
Documents to check prior to purchasing a hotel in Thailand
To successfully buy a hotel in Thailand, you should check the following information and documents, prior to the purchase. Be sure to prepare all necessary questions together with your lawyer.
- Hotel name, number of rooms, trademark protection of establishment
- Corporate entity, date of establishment, shareholders’ background
- Date of land acquisitions, land title deeds or other land documents, lease agreements, household registrations
- Building construction permits (with application date), including permits for maids quarters, guest accommodation, and swimming pool, if any
- Environmental impact assessment documentation, BOI promotion certificate (if any)
- Licenses for hotel business, restaurant business, seminar rooms, entertainment business (with application and expiration date)
- Liquor licenses, tobacco licenses, and similar
- Hotel management agreements and similar arrangements
- Agreements with marketing websites, organizations, and software (Agoda, Amadeus, Fidelio user license agreement, etc.)
- Other commercial agreements like maintenance and cleaning service agreements
Where should I buy a hotel in Thailand?
We’re not talking small money when everything from fund investors and overseas companies buy hotels in Thailand.
Choosing the right spot is as important as doing due diligence, to assure good capital appreciations and incomes in the future.
Luckily, the yields tend to be higher for hotels compared to residential property and average at 6-7% in Bangkok, according to JLL.
In smaller resort cities, the yields tend to be even higher.
The three most popular cities for hotel investments in Thailand are:
Buying a hotel in Bangkok
It’s not strange why Bangkok tops the list of the most popular destinations for investors to buy hotels. In 2017, around 80% of the transactions (in terms of value) were made in Bangkok.
Being the business hub in Thailand, and an alpha city in Asia overall, Bangkok can proudly say that it’s the most visited cities in the world.
With attractive yields averaging at 6-7%, and an upcoming tourism industry, buying a hotel in Bangkok can be lucrative.
Looking at the amounts of transactions made, merely 7 hotel acquisitions were made in 2018, a reduction of around 20% compared to 2017.
Buying a hotel in Phuket
Phuket has seen a great upswing in hotel investments from foreign companies the past years. It’s one of the most popular resort islands for travellers, and the hotel industry is flourishing.
One of the main benefits of operating in Phuket is the access to its international airport, having direct flights to many cities around Asia, and all over the world.
Phuket has been the number one choice for holiday spenders, and will continue to be so for a long time.
Buying a hotel in Samui
Samui is a better choice for travellers or residents who look for more peace and tranquility.
You’ll find significantly less condo buildings, but more villas being built on the island.
Even if prices have increased much over the years, Samui should be on your top 3 list when choosing a location for hotel investments in Thailand.