Thailand’s Thriving Hotel Sector
Thailand’s hotel sector is a key player in its economy, thanks to the country’s strong appeal as a tourist destination. This appeal isn’t just international; domestic tourism also contributes significantly. The sector’s growth and stability are attracting increasing attention from foreign investors looking to capitalize on Thailand’s tourism market.
Hotel Classifications and Legal Definitions
Hotel Definition and Types
According to the Hotel Act, B.E. 2547 (2004) [TH, EN], a ‘hotel’ means an accommodation established for business purposes to provide temporary accommodation services for travelers or any other person in exchange for compensation. Hotels are classified into four types:
Hotels are classified into four types based on their size and services:
Type 1: Hotels with up to 50 guest rooms only
Type 2: Hotels offering either:
- More than 50 guest rooms, or
- Guest rooms plus dining facilities
Type 3: Hotels providing:
- Guest rooms
- Dining facilities
- Either entertainment venue or conference room
Type 4: Hotels with complete facilities:
- Guest rooms
- Dining facilities
- Entertainment venues
- Conference rooms
Non-Hotel Category
Properties exempt from hotel classification include:
Small Accommodations:
- Maximum 8 rooms (single or multiple buildings)
- Maximum 30 guests capacity
- Must register as non-hotel accommodation
- Registration valid for 5 years
Other Exemptions:
- Government/state enterprise accommodations
- Non-profit educational/charitable properties
- Monthly or longer-term rentals
Foreign Investment in Thailand’s Hotel Industry: Key Legal Considerations
Foreign Business Act Considerations
Operating a hotel business in Thailand, apart from hotel management services, necessitates obtaining a foreign business license as per the Foreign Business Act.
Board of Investment (BOI) Criteria for Hotel Projects
The Board of Investment (BOI) offers promotional incentives for hotel businesses. As a governmental body, the BOI encourages investment in Thailand by offering tax and non-tax incentives to eligible businesses. These incentives include exemptions from import duties on machinery, corporate income tax exemptions for up to 8 years, and exemptions on dividends for promoted companies.
Key criteria for BOI hotel projects are:
1. Investment Requirements:
- Hotels with 100 or more rooms: Require a minimum investment of 2 million baht per room, excluding land and working capital.
- Hotels with fewer than 100 rooms: Need a total investment of at least 500 million baht, not counting land and working capital.
2. For Small and Medium Enterprises (SMEs):
- Hotels with 20 to 99 rooms must invest a minimum of 1 million baht per room, excluding land and working capital.
- Additional criteria include a minimum project investment of THB 500,000, excluding land and working capital, at least 51% Thai shareholding, a debt-to-equity ratio not exceeding 4:1, and total revenue from BOI-promoted and non-promoted activities not exceeding THB 500 million annually for the first three years.
3. Standardization and Approval:
- All projects must comply with standardization criteria and receive BOI approval.
4. Incentives and Eligibility
BOI specifies eligible regions for incentives. Projects located in Krabi, Bangkok, Kanchanaburi, Khon Kaen, Chachoengsao, Chon Buri, Chiang Mai, Nakhon Pathom, Nakhon Ratchasima, Nonthaburi, Pathum Thani, Prachuab Khiri Khan, Phra Nakhon Si Ayuthaya, Phang-nga, Phetchanuri, Phuket, Rayong, Songkla, Samut Prakan, Samut Sakhon, Saraburi, and Surat Thani are not eligible for import duty exemptions on machinery.
Establishing a Thai Company: The Mainstream Approach for Hotel Business
Obtaining a foreign business license in Thailand can be complex, and accessing benefits through the BOI may not be suitable for all foreign entrepreneurs interested in the hotel business. Therefore, the mainstream approach for those looking to enter the Thai hotel industry is to establish a Thai company.
Here’s how it works:
1. Create a Thai company where the majority of shareholders are Thai nationals. As a foreign investor, your ownership stake should not exceed 49% in the company.
2. This structure eliminates the need for a foreign business license, as the company is considered Thai.
3. To operate a hotel, you will need to appoint a Thai director who can assist with the hotel license application process.
Special Considerations for US Investors
The US-Thailand Treaty of Amity allows American investors to own and operate hotel businesses with 100% ownership, without Thai partners or foreign business license requirements. Note that the treaty does not grant land ownership rights – property must be acquired through lease or a Thai company. Standard hotel licensing requirements still apply.
Under the Treaty of Amity:
- Can operate without Thai partners
- Foreign ownership restrictions don’t apply
- Land ownership rights not included
Licensing and Registration Requirements
Hotel License Process and Requirements
Operating a hotel in Thailand requires proper licensing under the Hotel Act B.E. 2547 (2004). Unlicensed operations can result in imprisonment up to 1 year and/or fines up to 20,000 baht, plus daily fines up to 10,000 baht for continued violations.
License Application Process
- Get Construction License
- Apply at your district office
- Confirms building compliance with Hotel Act
- Verifies hotel use permission under Building Control Act
- Submit to Provincial Office
- File application after obtaining construction license
- Thai director must sign all application documents
- Requires qualified hotel manager appointment
- Authority Inspections
- Health, environmental, and construction reviews
- Process takes up to 90 working days
- Environmental Impact Assessment may be required
- License Issuance
- 15-30 working days if approved
- Total process: approximately six months
- Valid for five years
Required Documentation
- Construction permit
- Interior floor plans
- Location map
- Company registration documents
- Landlord documents (for leased properties)
- Manager qualification documents
- Environmental assessment (if applicable)
Information on required documents is also available here.
Important Notes
- Existing hotel acquisitions require license transfer to new owner
- License renewal required every five years
- Hotel manager must have proper qualifications
- Regular compliance inspections may occur
For detailed document requirements and latest forms, consult the Provincial Office or Department of Provincial Administration.
Registration for Non-Hotel Establishments
Small accommodations meeting the exemption criteria must still register with authorities. Registration can be completed through the electronic government system or in person at designated offices. The registration certificate is valid for 5 years, and establishments must comply with relevant safety standards and regulations.
For detailed guidelines on registering non-hotel accommodations in Thailand, including necessary forms and procedures, please refer to the latest Ministerial Regulation and Ministry of Interior announcements.
No Hotel Business in Condominiums
On November 6, 2023, Thailand’s Department of Lands declared that condominium units cannot be used for hotel businesses. This was detailed in Circular Letter No. Mor Tor 0517.3/Wor 23302 sent to all provincial governors. The letter states that while some commercial activities are allowed in condominiums as per the Condominium Act (No. 4) B.E. 2551 (2008), this does not include hotel operations.
The letter refers to the Council of State’s Opinion No. 710/2550. It clarifies that only those commercial activities that serve condominium residents, like convenience stores or restaurants, are permitted. These businesses must also have separate entrances and exits to avoid disturbing residents.
Therefore, using condominiums for hotel business is not allowed, regardless of any agreement from other condo owners or changes in the building’s designated use. If a building owner wants to operate a hotel in a former condominium, they must first deregister it as a condominium under the Condominium Act. After deregistration, the building can be used for hotel operations, but it must comply with hotel laws and other relevant regulations.
For further inquiries about the hotel business, feel free to contact me directly or use the form below.