Seven steps: Thai hotel business license
Delayed enforcement of the Hotel Act of Thailand
To operate a hospitality establishment is a regulated business and requires a hotel license. Serviced apartments, poshtels, guesthouses, or even bungalows by the beach qualify under certain circumstances as hotel as well. Illegal hoteliers are subject to a jail sentence for up to one year and a fine of up to THB 20,000. They can also be fined THB 10,000 daily if they continue to run their business illegally. As a foreigner, the penalty might come in combination with a black-listing.
Based on recent military announcements, certain regulations are currently suspended. Under such conditions, a grace period is granted to fulfill the legal requirements under the Hotel Act, as well as town planning and building control regulations. This might include the criminal liability of the hotel manager and hotel operator. The hotel license amnesty is granted under these requirements: (i) The hotel has to fall under Military Regulation NCPO Order No. 6/2562, (ii) A self-denunciation has to be filed and the hotel business has to be registered as non-compliant, and (iii) the hotel building’s fire safety system has to be in compliance with the laws. The hotel license amnesty is limited until August 2021. It is advisable to use this window of opportunity to get the hotel business licensed.
How to obtain a hotel license in due course
A hotel is defined under the Hotel Act 2004 as any business providing paid accommodation for less than a month, irrespectively of the number or capacity of the rooms. Even the smallest villa and a one-bedroom condominium unit can qualify as a hotel under the law. However, the Hotel Act legitimizes ministerial regulations to regulate this otherwise.
To successfully apply for a hotel business application, in general, these seven steps are required:
Step 1: Is the business exempted under the 4-20 privilege? An application is only needed if (i) the business qualifies as a hotel and (ii) such a hotel is not license-free. Under the Ministerial Regulation 2008, a hotel license is not required if the business has not more than four rooms on all floors in all buildings, has a total service capacity of no more than twenty guests, qualifies as a small business which provides an additional source of income for the owner, and reports (form TM30) its daily rental business to the government (hotel registrar). If the business is in-line with these requirements, it is unclear whether it does not qualify as a hotel (“no hotel”) or whether it is a license-free hotel business (“type-zero hotel”). The latest court decisions seem to favor the latter interpretation.
In accordance with the ministerial regulation, hotels can be classified into different types as follows:
- Type 0: hotels which are exempted from certain requirements including the need to obtain a hotel business license,
- Type 1: hotels providing accommodation only, the number of rooms does not exceed fifty, the size of each room is not less than eight square meters,
- Type 2: hotels providing accommodation and catering or restaurant services, the size of each room is not less than eight square meters,
- Type 3: hotels giving accommodation, catering or restaurant services, the size of each room is not less than 14 square meters, and which has either conference rooms or entertainment venues which under the Place of Service Act could be a place for dancing, bars, and nightclubs or spa,
- Type 4: hotels providing accommodation, catering or restaurant services, conference rooms, and entertainment venues, the size of each room is not less than 14 square meters.
For Type 3 and 4 hotels, no entertainment venues will be allowed unless these hotels have more than 80 rooms, are located in entertainment areas, or serve food, alcohol or entertainment only, and have opening hours after midnight.
Step 2: The hotel business. An investment promotion by the Board of Investment can be obtained under category 7.4.3 (Hotels). For this, the hotel business must have at least one hundred keys (keys means rooms) or a minimum investment (excluding the cost of land and working capital) of not less than THB 500 million. The BOI promotion requires a new investment and, therefore, an existing project is not easily eligible to be promoted. The hotel business can be carried out by a company that is set-up under the U.S. Thai Treaty of Amity. However, such treaty company is not allowed to own the hotel premises. Thailand’s hotel management service businesses are excluded from the restrictions of the Foreign Business Act.
Step 3: Building structure, floor plans, etc. Legal aspects for granting the license are the location of the hotel business, building structures, required facilities, minimum guest room area, health and environmental issues. The hotel building must fulfill certain safety standards depending on its number of floors. As an example: With no more than two floors and less than ten rooms, the walkway needs to be more than one meter wide and must arrange for fire extinguishers. For buildings having more than two floors, and more rooms, the sidewalk must be even wider. In buildings with more than four stories, emergency escape stairways made of fire-resistant material is required. Fire extinguishers, smoke alarms, escape route signage, emergency lighting and other legal requirements have to be fulfilled as well.
Step 4: Licenses and permissions: For a hotel with more than 80 rooms, or depending on its size or location, an Environment Impact Assessment (EIA) is required. permit, a license from the local administration official must be obtained. If the restaurant has an area less than 200 square meters, the owner must only notify the local authorities for a Certificate of Notification as stated in Public Health Act.
There is no new “small hotel law.” However, to facilitate existing outlawed hotel businesses, a new Ministerial Regulation came into effect on August 19, 2016, which sets for an interim period of five years relaxed requirements for the reclassification of existing buildings to be used as a hotel.
Permit for Occupation: For the building, it is required to obtain a “Permit for Occupation” under the Building Control Law, or, if the building is located outside of the Building Control Zone, a “Certification of Building Inspection” issued by Licensed Civil Engineer under Thailand’s Engineer Law. To avoid an outlawed hotel, apart from the Building Control Law, the requirements of the Urban Planning Law, the Law regarding Protection and Response of Public Hazard, Law regarding Public Health, and the Law Regarding Promotion and Maintaining the National Environment have to be taken into consideration. Also, the project has to comply with the provisions of the Ministerial Regulations regarding Hotel Business Operations.
Step 5: Contractual arrangements: The hotel needs proper contractual arrangements under a hotel operating model as explained in “The hotel management agreement”.
Step 6: Qualification of the hotel manager. The hotel needs a dedicated hotel manager with appropriate education or experiences and the duties to manage the hotel affairs. This can be the same person as the hotel business operator.
Step 7: Application process. Licenses can be applied for hotels, restaurant businesses, seminar room businesses, and additional entertainment businesses with discotheque, bar, nightclub, and spa. The license has a validity of five years and can be renewed. Additional licenses might be required with respect to food, liquor, entertainment, and more.
Professional services to obtain a hotel business license
PUGNATORIUS Ltd. is a Bangkok-based specialist provider of bespoke transactional legal and tax advice in the corporate and property legal and taxation industry sectors. The law firm assists hotel operators without a license to apply at the competent governmental agencies. The steps include
- Review of the legal prerequisites to obtain a hotel business license and allocation under the type 1 till 4 under the law.
- Examination of the current compliance of the building structure, floor plan, interior and support and assistance in a remodeling and conversion of the building to comply with the Building Control Act and the requirements of the construction, health, and environmental authorities.
- Examination of the current compliance of the hotel operator, hotel staff, and hotel management for the hotel business license requirements.
- Support and assistance in the preceding steps to lay the legal foundations to apply for a hotel business license, including occupation permit, environmental impact assessment.
- Design and preparation of the legal agreements and supporting documents, like hotel management or similar contracts.
- Application of the hotel license at the Department of Provincial Administration or the Provincial Governor’s Office and assisting and monitoring throughout the whole application process.
Each case is different. Telephone inquiries and ad-hoc email requests on Thailand’s regulatory framework without details and documentation are not accepted by the law firm. Individual support and professional advice are available under a paid consultancy agreement only.