The hotel acquisition in Thailand

hotel business license thailand

hotel business license thailand

Why are in Thailand so many hotels for sale?

“Several factors have forced numerous small and medium-sized hoteliers to put their properties on the block.” -Bangkok Post, 14/11/19. The majority of hotel businesses on sale do not possess a hotel business license. The government is stepping up measures to axe illegal hotels across Thailand. The government signals further crackdowns on non-registered hotels. Hotel operators without a license will be charged and punished if they fail to meet regulations. In certain cases, a grace period had been provided by an emergency decree. This opens a window of opportunities for foreign investors to acquire the outlawed hotel, to get it subsequently licensed and to operate it in full compliance with Thai regulatory requirements.

For foreign investors, an attractive opportunity lies in the option to acquire a badly managed and illegally operating hospitality business at a prominent location with great potential. After cleaning out the stable and licensing the business within the grace period, this hotel business can be sustainably upgraded to a solid investment. 

Hotel acquisition strategies in interesting times

Thailand’s hospitality sector plays traditionally an important economic role for travel and tourism 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 a 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”

In a 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.

Hotel Due diligence: 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. 

Hotel acquisition procedure: The buyer’s business considerations, the investment structure for the turnkey business, the corporate due diligence examination, as well as the sale and purchase agreement and supporting documents, are addressed in the article “The acquisition of a Thai company“, based on the keynote presentation on the international Merger & Acquisition conference “Ensuring smooth flowing deals and a successful business integration” in Bangkok. 

Professional services in the hospitality sector from Bangkok for hotel acquisitions in Thailand

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Legal and tax advice on Thailand’s hotel and hospitality industry are one of the law firm’s areas of competence, long-standing experience, and unique market reputation. It provides sophisticated legal assistance in identifying legally viable hotel purchase opportunities, advises on hotel licensing requirements and conditions, and provides professional assistance through the whole hotel acquisition process. 

Sophisticated solutions in a complex legal environment. 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“.

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Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.

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