We’ve mostly talked about buying residential real estate previously, covering foreign ownership regulations, taxes, and more. In this article, we take it to another level and review how it works when buying hotels and resorts.
Buying a hotel is generally more complex as the properties are treated as businesses. As such, different regulations apply. The transaction values tend to be higher as well.
In this article, you’ll learn how it works when buying a hotel or a resort in Thailand and the regulations that apply.
Topics covered:
- Can foreigners buy hotels in Thailand?
- Foreign Ownership Regulations of Hotels in Thailand
- How do I get a hotel license in Thailand?
- Hotel Classifications in Thailand
- Documents & Information when Buying Hotels in Thailand
- The Best Cities to Buy Hotels in Thailand
Can foreigners buy hotels in Thailand?
Foreign individuals cannot invest in hotels as we are only allowed to own strata-title units, which are predominantly in condominium projects.
Even if we can buy residential physical structures like villas, we are not allowed to own the land on which these are built on.
Therefore, foreign corporations set up a Joint Venture (JV) with a local partner or a Thai Limited Company (LLC) to invest in hotels.
This generally requires that you apply for a Foreign Business License (FBL) if foreigners own more than 49% of the shares.
Worth mentioning is also that the Board of Investment (BOI) sometimes exempt foreigners from applying for an FBL if you invest in special projects in certain areas.
Foreign Ownership Regulations of Hotels in Thailand
It’s important that you learn about local ownership regulations and find a credible partner before you engage in the commercial real estate market.
There are several regulations that affect you as a property owner, the building, operations, management, and more.
The most frequently mentioned law is Thailand’s Hotel Act 2004, which stipulates your rights as a foreign hotel owner in Thailand.
Thailand’s Hotel Act 2004
The Hotel Act 2004 explains that companies providing paid accommodation for less than 30 days operate as hotel services.
Therefore, simply 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 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 companies 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.
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
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. The treaty restricts Americans from investments in the following industries/property types:
- Communications
- Transportation
- Fiduciary functions
- Banking involving depository functions
- The exploitation of land and natural resources
- Owning land
- Domestic trade in agricultural products
Thailand’s Board of Investment (BOI)
BOI can give exemptions and allow you to manage your business in Thailand at the same time as you’re the majority owner of the shares in your Thai company.
This is sometimes based on a project level and decided by the BOI. These 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.
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.”
How do I get a hotel license in Thailand?
To run a hotel, you need a hotel license. It’s one of the most important to obtain before you start operating. Next, we will review what the costs and process are to obtain a hotel license in Thailand.
Documents Needed to Get a Hotel License
Generally, you have to provide the following documents to get a hotel license:
- Landlord documents
- Map of the location
- Construction permit
- Map of the interior
- Other company documents
How much does it cost to get a hotel license?
The cost depends on what kind of hotel type you acquire (this is something we review in greater detail below in the next section).
The application fees are as follows:
- THB 10,000: For a hotel business with max. 50 rooms
- THB 20,000: For hotels that have restaurants
- THB 30,000: For a hotel with a restaurant and seminar rooms
- THB 40,000: For hotels with restaurants, seminar rooms, and entertainment businesses
Besides, you have to pay THB 80 per room each year.
The Process of Getting a Hotel License
The process to get a hotel license is generally as follows:
- Submit an application to the district office to get a construction license
- A second application to be provided to the provincial office. The application is sent to the health, construction, and environment authority
- After thorough inspection and verification, the authorities reject or approve the applications
It takes around 6 months to get a hotel license.
Hotel Classifications in Thailand
So, the licensing needed depends on what kind of hotel operation you run, and how big it is. Hotel businesses are divided into five different types as follows:
Type 0
These hotels are exempted from certain requirements, including the need to obtain a hotel business license.
Type 1
Type 1 hotels provide accommodation only. These hotels have less or equal to 50 rooms and the size of each room is equal to or bigger than 8 square meters.
Type 2
Type 2 hotels provide accommodation as well as catering or restaurant services. The size of each room is equal to or more than 8 square meters.
Type 3
These hotels provide accommodation, catering, or restaurant services, and the size of each room is equal to or larger than 14 square meters. Besides, the hotel has conference rooms or entertainment venues which under the Place of Service Act could be a place for dancing, bars, and nightclubs or spas.
Type 4
Type 4 hotels provide accommodation, catering, or restaurant services, conference rooms, and entertainment venues. The size of each room is equal to or bigger than 14 square meters.
Documents When Purchasing Hotels in Thailand
To successfully buy a hotel in Thailand, you should check the following information and documents, prior to the purchase.
- 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
These are just examples and you should review and assure that additional documents are available upon the acquisition.
The Best Cities to Buy Hotels in Thailand
Hotels generally fetch for tens or hundreds of millions of US dollars. Choosing a suitable city and area to secure future incomes is as important as the legalities mentioned above.
With that said, the yields tend to be higher for hotels compared to residential property and average at 6% to 7% in Bangkok, according to JLL. In smaller resort cities, the yields can be even higher.
The three most popular cities for hotel investments in Thailand are:
- Bangkok
- Samui
- Phuket
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 were made in Bangkok in terms of value.
Being the financial hub in Thailand and an alpha city in Asia overall, Bangkok can proudly say that it’s the most visited city in the world.
Looking at the amounts of transactions made, merely 7 hotel acquisitions were made in 2018, a reduction of around 20% compared to 2017.
The hotel industry was hit badly in 2020 due to the COVID-19 pandemic which put foreign investments to a halt. I also recommend you to read our separate article that explains our predictions for Thailand’s real estate market outlook.
Phuket
Phuket has seen a great upswing in hotel investments from foreign companies in the past years. It’s one of the most popular resort islands for travelers, and the hotel industry has flourished.
One of the main benefits of operating in Phuket is 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. The same as for Bangkok, the city had troubles attracting tourists due to the ongoing COVID-19 pandemic.
Koh Samui
Samui is a better choice for travellers or residents who look for more peace and tranquility. Here, you’ll find significantly fewer 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.
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