The hotel acquisition in Thailand
Hotel acquisition strategies in bad times: Avoid problem cases and legally distressed hotel properties to efficiently benefit from Thailand’s future prospects
Traditionally Thailand’s hospitality sector, travel and tourism play an important economic role in the land of smile. From the low budget hostels, postels, guest houses, serviced apartments, condotels, vacation clubs, holidays resorts to the five stars hotel category in Hua Hin, Pattaya, Phuket, Koh Samui, Koh Chang, Koh Phangan or Koh Lanta, Thailand’s hotel industry creates not only revenues but also jobs for educated and uneducated Thais.
However, it is not always a gold mine and promising venture to run a hotel in Bangkok, on the beaches and islands, or in the regional centers of Thailand. The fact that an enormous number of hotels are currently changing hands is not at all a sign of growth and international expansions. Foreign investors experience a buyers’ market in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations.
Thailand’s outlawed hotels are more and more under pressure to obtain a proper hotel business license. Without such license, the increasing risks of being closed-down have to be evaluated and taken into consideration. Many illegal hotel operators do not have the financial means and persistence to go the extra mile obtaining the hotel business license. Such hospitality ventures are a high-risk but high-reward target for brave foreign investors.
In the medium and long run, Thailand’s hotel industry has all ingredients to prosper and it is now the perfect point in time to investigate Thailand’s hotel markets for a special opportunity. Apart from financial considerations and the decision which area and province provide the best hotel location, it is of utmost importance to short-list available hotels on legal problems as a shepherd divides his sheep from his goats.
Top 10 initial legal information requested for hotel acquisitions in the “nation of hospitality”
Ina hotel acquisition process, the very first analysis should review these ten key documents:
- 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, other
- 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
This compilation constitutes a matrix of basic legal characteristics and criteria as a very first step to identify possible acquisition objects. It should not at all be seen as a “hotel due diligence checklist”, but just as a compilation of the top-10 legal data required to avoid time-wasting discussions with brokers and hotel owners. The above remarks are highly simplified and should not be taken as guidance for a specific case, which is typically unrecognized intense and complex.
Professional services in the hospitality sector from Bangkok for hotel acquisitions in Thailand
PUGNATORIUS Ltd. provides sophisticated legal assistance in identifying legally viable hotel purchase opportunities and offers – and professional assistance through the whole hotel acquisition process.
The law firm’s other professional services in the hotel and hospitality sector include
- Development of an appropriate acquisition structure under Thailand’s foreigner legislation,
- Property due diligence, and corporate due diligence, if required,
- Zoning, bylaw & regulation survey,
- Contract drafting and negotiation,
- Resort development and construction,
- Hotel business license application,
- Hotel and villa management agreements,
- Finance and restructuring,
- Registration and transfer of legal ownership, and
- Tax advice and planning
The terms for assigning PUGNATORIUS Ltd. are described at “Legal services for the hotel and hospitality sector“.