Are you planning on setting up operations in Thailand’s tourism industry? Then you should consider that the hospitality sector is a cornerstone of this industry, as it plays a vital role in attracting and accommodating millions of visitors annually. This article will help you plan investments in the sector and guide you in securing a hotel license in Thailand.
Pre-requisites for setting up a hotel business in Thailand
Determining the right legal entity for applying for your hotel license in Thailand
Before setting up your hotel and applying for a hotel license in Thailand, you need to establish a legal entity. The most common type of business to register is a limited liability company (LLC). An LLC allows up to 49% foreign ownership, meaning you will need a Thai partner when starting. 100% foreign ownership is allowed in the following cases:
- Once you have registered an LLC, you can apply for promotion by the Thai Board of Investment (BOI). This allows you to benefit from tax incentives and 100% foreign ownership, as long as you meet investment requirements in targeted industries.
- To run a hotel business with majority foreign ownership, you can apply for a Foreign Business License (FBL). This allows you to bypass certain restrictions within the industry if the Thai government deems your operations as beneficial to the market.
Emerhub can help you determine the best way to set up your hospitality business in Thailand to ensure that your capital is invested strategically. Our local experts can also assist you with finding Thai partners to ensure that you meet the legal requirements for applying for a hotel license in Thailand.
Finding a property for your accommodation
Currently, Thailand has several restrictions in place preventing foreigners from owning land. Therefore in most cases, you must find a Thai partner if you wish to set up a hotel business on a freehold property. If you secure a BOI promotion or an FBL, you may be allowed to purchase property, but this is evaluated on a case-by-case basis.
The most common solution for foreigners seeking to set up a property business in Thailand is through a long-term leasehold. While you cannot build equity, you can benefit from lower upfront costs for setting up your hotel property. Alternatively, you can also set up a Hotel Management Agreement (HMA) with a hotel owner in Thailand to operate an existing accommodation.
Emerhub’s local property management experts can help you determine the best means for securing a property for your hotel business before applying for a hotel license in Thailand. To learn more, take a look at our related guide to buying property in Thailand.
Regulations on foreign investments
The hotel and accommodation industry falls under a category restricted by the Foreign Business Act: businesses in which local entrepreneurs may not yet be ready to compete with foreign competition. As such, if you are considering investing in this sector you must meet the minimum capital requirements for foreigners.
The minimum acceptable amount of capital investment for setting up a hotel in Thailand is 3 million THB, which is equivalent to approximately USD 85,320. If you are seeking BOI promotion, then your hotel will need 100 rooms or a minimum investment of 500 million THB or approximately USD 14.5 million (excluding the cost of land and working capital).
How to set up your business and obtain a hotel license in Thailand
Overview of the required business licenses for operating a hotel in Thailand
Setting up a foreign-owned hotel business in Thailand requires several types of licenses, which depend on the type of accommodation you will be running and potential amenities and services that you are planning to include within your hotel:
- Foreign Business License: Mandatory if foreign ownership exceeds 49% of the hotel’s shares. The application process involves securing approval from relevant ministries and meeting minimum capital investment requirements.
- Building/Construction License: This is required for new properties or if you are planning on renovating the hotel property before operations. If you are leasing the property, generally the leasing party or construction company will usually already have this license.
- Environmental impact assessment: Mandatory for hotels consisting of 80 rooms or more, regardless of location. The assessment is a prerequisite for obtaining a hotel license.
- Initial environmental examination: Hotels with less than 80 rooms must go through an IEE process if they are situated in certain specified areas, such as Pattaya, Phuket, and Koh Samui.
- Hotel Business License:
- If your establishment consists of more than 4 rooms and can accommodate 20 people or more, then you must apply for a hotel license
- If your establishment consists of less than 4 rooms and can accommodate less than 20 people, then you must instead secure a guesthouse license
- Restaurant Business License: Mandatory if your hotel provides catering or restaurant services. Your property premises must have a minimum of 200 m2 to apply for this license. Smaller establishments must also secure a certification of notice from the local District Office.
- Alcohol License: Required if your hotel serves alcohol products on the property. The liquor license must be obtained from the Local Excise Department (Ministry of Finance).
- Entertainment License: Must be secured if your hotel offers live entertainment and music (radio, streaming platforms, etc.) or performances. You may also need a music license from the Department of Intellectual Property depending on trademarks.
- Fire Safety Certification: Issued by the Department of Fire and Rescue services and needed to comply with fire safety regulations.
Emerhub can help you identify the required licenses for your specific hotel business plans. Our local team will also oversee the application process for your hotel license in Thailand and will coordinate with the different departments in your stead to ensure a fast and compliant process.
Establishing a strong Hotel Management Agreement
An HMA is a partnership agreement between a hotel owner (asset holder) and a hotel management company (asset operator). Generally, the operator will leverage their brand recognition, experience in hotel management and marketing, and distribution channels to manage the day-to-day hotel business.
The terms of the HMA can vary depending on the negotiations and the scope of the specific project, however, the following clauses are common to most agreements:
- Length of agreement
- Management fees
- Branding standards
- Renovations and maintenance
- Marketing and sales
Remember that you will need to carefully consider the balance of operational control and franchise fees to ensure that the agreement is beneficial to both parties. Emerhub can assist you in setting up a strong Hotel Management Agreement that complies with local standards while ensuring that you can successfully operate within the Thai hospitality industry.
Setting up a medical treatment retreat in Thailand
Its is increasingly common for hotel businesses in Thailand to also offer medical treatment retreats to take advantage of the country’s growing medical tourism industry. If you are planning on operating a hotel with medical treatment, then you will need to navigate additional compliance requirements and secure the following medical treatment licenses:
- Clinic License: This is essential for providing any medical treatments within your hotel.
- Medical Personnel Licenses: All medical professionals involved must have valid Thai medical licenses.
- Drug License: Mandatory if you’re dispensing or administering medication.
- Medical Equipment Registration: Any medical equipment used on your premises must be registered.
Emerhub’s team of local experts can help you navigate the intricacies of securing your hotel license in Thailand and provide insights on key issues such as finding the right property and putting in place efficient management agreements. If you are interested in starting a hotel business in Thailand, contact us via the form below to get in touch with our local experts!
