How to buy a hotel in Thailand?

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:

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.

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.

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.

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.

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.

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:

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:

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.

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.).

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.

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

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:

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.