How to obtain a hotel licence
IN A NUTSHELL: The time of outlawed hotel businesses is coming to an end. Ask us for a proposal to properly license your hotel business in Thailand as long as it is still open.
New enforcement of the Hotel Act of Thailand
You certainly read it in the news: Authorities are taking action against hotel owners for operating without a license. Officials and police may at any time descend on the hotel premises to check its license status. If the hotel manager can’t provide evidence showing that the hotel has permission to operate, he is questioned at the local police station, charged with illegally running a hotel and warned that if the hotel continued with its services an arrest would be made.
A hotel business is defined under the law as the offering of accommodation to the public for a duration below a month in exchange for payment, either with the capacity of more than four rooms in total or more than twenty guests.
In previous times, not long ago, the Thai Hotel Association (THA) had a pragmatic view regarding hotel licenses: “Since it’s an unenforced law, people don’t feel the need to get one.” However, times are changing, and the enforcement of existing legislation is an unstoppable transition process, and playing by the rules might be inevitable rather sooner than later.
Given the current crackdown against hotel businesses without or with doubtful hotel license, it is advisable to act rather sooner than later to clean-up existing license documents or to apply for a hotel license. The same goes for serviced apartments, poshtels, guesthouses, or even bungalows by the beach which qualify under the law as a hotel.
Regulatory framework for hotel and restaurant businesses
The hotel industry is under the responsibility of the Ministry of Interior, Inspection & Grievances Division, the Ministry of Commerce, Department of Business Development and the Ministry of Public Health, Department of Health. Under a ministerial regulation, hotels are classified as follows:
- 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 providing 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.
For a hotel with more than 80 rooms, or depending on its size or location, an Environment Impact Assessment (EIA) is required. To operate a restaurant on an area of more than 200 square meters, 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 official 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.
An investment promotion by the Board of Investment can be obtained under category 7.4.3 (Hotels). This requires a new investment and, therefore, any existing project is not easily eligible to be promoted by the BOI. 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 hotel business can be carried out by a company which 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 industry consists of roughly 20,000 hotels with one million beds. According to the Thai Hotel Association, 10,000 hotels with 500,000 beds do not own a valid hotel business license from the Department of Provincial Administration. In Bangkok alone, there are estimated to be more than 300 illegal hotels. The numbers are worse in major tourist destinations like Koh Samui, Phuket, Hua Hin, and Pattaya. In Chiang Mai, less than 15% of the 700 hotels with 40,000 beds are licensed. Recently, many illegal hotels have opened in emerging destinations such as Ayutthaya, Krabi, Mukdahan, Nakhon Phanom, Kanchanaburi and Nakhon Ratchasima.
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.
Legal requirements for a hotel license in Thailand
Hotel licenses are governed by Thailand’s Hotel Act. Licenses can be applied for hotels, restaurant businesses, seminar room business and additional entertainment businesses with discotheque, bar, nightclub, and spa. The license has a validity of five years and can be renewed. Legal aspects for granting the license are the location of the business, building structures, required facilities, minimum guest room area, health and environmental issues and employment requirements, especially for a dedicated hotel manager with appropriate education or experiences.
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 walkway must be even wider. In buildings with more than four floors, 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.
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 in the Ministerial Regulations regarding Hotel Business Operations.
Additional licenses might be required with respect to food, liquor, entertainment and more.
Professional services to obtain a hotel business license
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, as hotel management or similar agreements.
- 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.
Ask the law firm for a specific consultancy and support offer to avoid an immediate close-down of the business.
The above remarks are highly simplified and should not be taken as guidance for a particular case, which is typically unrecognized intense and complex. PUGNATORIUS supports Thailand’s hotel owners and hotel operators with smart legal solutions regarding hotel sales and acquisitions, hotel business licenses, sophisticated hotel management agreements and a highly efficient cross-border tax planning. We dispose of a broad database of example work products to avoid time-consuming and costly mistakes. More about Thailand’s hotel industry at pugnatorius.com/category/hotel. Secure your hotel in paradise.