Buying a hotel in Thailand as a foreigner

Attractiveness of hotel business in Thailand: Usually, Thailand is the second most touristic country in Asia after China. It is expected that tourism in Thailand will double in the coming years (2030). Unfortunately, the health crisis has had an impact on the hotel business, through the many restrictions imposed by the Government but also internationally. However, it is reported that tourism will resume its dynamism with effervescence, which will be intensified after the restoration of normal life. The field of the ecology and the high-end tourism are very strong sectors in Thailand:

➤ Ecology: this sector is booming
➤ High-end tourism: a new clientele is formed in the world of luxury; however, the high-end hotel sector is for the moment not very developed

Opportunity of repurchasing after crisis: The hotel sector in Thailand is stricken, following the sanitary crisis (covid-19). Indeed, 50% of the establishments closed during the second wave of covid-19. Many owners were forced to sell their properties and some went bankrupt. Indeed, the collapse of tourism was reflected in the occupancy rate before covid-19, from 83% to 5%. The Thai government, particularly concerned about tourism, anticipated the shortfall by injecting aid for the hotel sector.

As a result, real estate prices are now at their lowest (2021) and there are many opportunities to buy property after the health crisis. It can be concluded that the opportunity for buyout after the health crisis is excellent. Moreover, the Thai government has the ambition to accelerate tourism after the health crisis, when the restrictions will be lifted.

Which solutions to buy a hotel in Thailand?

Foreigners as natural persons are not allowed to invest in hotels, they can only acquire strata-title units in principle for condominium projects. The only possibility as a natural person, is to buy a residence such as a villa and rent the land without the possibility of purchase.

1. Possibility of owning a property through a Thai company

However, other more complex solutions are available to a foreign investor, such as the possibility of purchasing real estate through a Thai company. Foreign companies can set up either a joint venture with a Thai partner or a private limited company.

The establishment of your company will be governed by the Foreign Business Act and you will need to obtain a license from the Department of Business Development before you can start your business activities. In fact, you will be able to acquire 49% of the shares and thanks to a voting system orchestrated by your lawyer, benefit from the management of your company in an implicit way. Therefore, through your company you will be able to purchase a piece of land and hold full ownership.

2. 30 years concession renewable once

A second solution is offered to a foreign investor by the establishment of a 30-year leasehold. The buyer can hold full ownership of the property, as well as a 30-year lease renewable once. This form of ownership is relatively common in Thailand but has the disadvantage of a maximum term of 60 years (Section 537 and following of the Thai Civil and Commercial Code).

However, it is possible to extend the term of the lease to 90 years, through a commercial practice of offering 2 additional 30-year leases, through a separate contract (addendum or memorandum), by which the lessor agrees to extend the contract for a 30-year period.

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The 6 steps to buy a hotel in Thailand

Step 1: Business plan to the purchase of a hotel

The first step to carry out before buying a hotel is the “business plan“, which consists in establishing a file of presentation of the project. This file allows you to research, analyze and carry out a feasibility study of the project (action plan, means, financing, etc.) and of its economic environment (market, competition, etc.).

The business plan will allow to establish the first drawings of the project and thus to structure it, then to allow its realization.

Step 2: Obtain the licenses and authorizations

Thereafter, you will have to obtain a foreign business license to buy and operate a hotel in Thailand (Foreign business act). To obtain this license, you must have a minimum capital of approximately 3 million THB, that is to say approximately 82 400 euros.
Nevertheless, you will not need a Foreign business license, if you create a company with Thai nationals (you will have 49% of shares in your company). In addition, other licenses may be required depending on your activities:

➤ License for hotel activity (stated below)
➤ License for catering, seminar rooms, entertainment
➤ License for alcohol and tobacco etc

Step 3: Perform due diligence

Before proposing the purchase of a hotel, it is wise to investigate the hotel assets, as well as the company that owns these assets or operates the hotel. Indeed, it is essential for a buyer to have useful information to ensure the sustainability of the hotel project. It is therefore important to understand the hotel’s activities, its economic environment and analyze its long-term viability.

An audit will be carried out in order to rule out any anomalies resulting from this investigation and to have the same information held by the seller. This audit will take into account 5 fundamental points:

The legal due diligence: this ensures that the active establishment, complies with the legal standards imposed by the Thai Government and to examine all current contracts
The operational and economic environment: This audit allows to exploit with finesse all the data related to the establishment internally (management for example) and externally (clientele, economic market, competition etc.) in order to optimize its efficiency
The technical inspection of the building: an inventory of all the technical elements and its equipment will be examined, with a view to carrying out work if necessary. The seller will be responsible for this
Finance, accounting and taxation: all financial and accounting data will be studied, as well as the current and projected taxation
Human resources: all data will be retrieved (number of employees, salaries, social charges, benefits, etc.) in order to forecast future costs and restructure the general organization if necessary

Step 4: Reservation contract

Once you have chosen the property you wish to buy, you will have to make a deposit and sign an intent to purchase letter. This contract is important because it will secure the future purchase contract. Also, it will allow you to reserve the property and allow a refundable deposit, in case of defect.

The first guarantees will be detailed in this reservation contract, as well as the essential elements of the future contract.

Step 5: Purchase contract

Then you will be able to reciprocally establish a real estate purchase agreement which stipulates the terms and conditions and thus the essential elements of the contract.

The parties must be identified, the purchase price, the object etc. This contract must be accompanied by any document allowing the identification of the object (building permit, land register, plans of the building etc.).

Step 6: Transfer of ownership or assignment of shares

Once the purchase contract has been signed, you have the possibility to carry out a transfer of ownership or to buy back the seller’s social shares.
Firstly, the transfer of ownership of a building on land must be registered with the local land office. The transfer fee is 2%, in which case it is customary to split this fee equally between the buyer and the seller.
You can, in a second step, buy the seller’s shares (legal entity) and hold the property of the building accordingly. You can use a share purchase agreement to do so.

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How to obtain the hotel license: Thailand Hotel Act

In addition, a classification distinguishes the type of hotel in Thailand, according to which the administrative fees will vary, below:

Type 0: Exempt hotels
- Administrative fees and 80 THB per room/year.
- 0 THB
Type 1: Accommodation
- ≤ 50 rooms not smaller than 8m².
- Administrative fees and 80 THB per room/year.
- 10 000 THB
Type 2: Accommodation + catering
- The size of the room must not be less than 8m².
- Administrative fees and 80 THB per room/year.
- 20 000 THB
Type 3: Accommodation + catering + seminar rooms
- The size of the room must not be less than 14m².
- Administrative fees and 80 THB per room/year.
- 30 000 THB
Type 4: Accommodation + catering + seminar rooms + entertainment (bar, nightclub, spa)
- The size of the room must not be less than 14m².
- Administrative fees and 80 THB per room/year.
- 40 000 THB

A company is required to obtain a license under two cumulative conditions.
First, your business offers paid accommodation for less than 30 days. In this case, your establishment will be considered under the Thailand Hotel Act 2004 as a hotel.
Secondly, your hotel does not have a hotel license exemption. Indeed, you will not need a license if your establishment has no more than 4 rooms, its total capacity does not exceed 20 guests, is considered as a micro-business offering a subsidiary income or reports its daily rental activity to the Thai Government (hotel registry).

Next, you can prepare some documents to obtain your license:

➤ A title deed
➤ A location map
➤ A building permit
➤ A plan of the establishment

Once all the documents are in place, you can submit an application to the district office to obtain your construction license. A second application must be made to the provincial office. Finally, the competent authorities will inspect your file before giving a verdict. It takes about 6 months to obtain a license. Finally, your hotel license will be valid for 5 years, renewable.

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