Thailand's booming tourist trade would suggest that a hotel is an attractive option for anyone looking to buy a business in the country.
Nevertheless, it's never the easiest industry in which to operate and Thailand does pose its own challenges.
Due diligence then - both on any hotel you're targeting and on your own suitability to being a hotelier - is not a process you should rush.
What it takes to be a successful hotelier
Never having fallen under the control of European empires (one of only 10 countries), Thailand's legal and regulatory system has fewer similarities to European models than, say, India, Singapore or Malaysia. As such, if buying and running a UK-based hotel is a tough undertaking for a Brit, then it's a more fiendish challenge still for expats doing likewise in Thailand.
As well as Thai business connections and some comprehension of Thai laws, language and culture, the following attributes are useful or even essential to success in the hotel trade:
- Experience working in the hotel or hospitality trade - at least as an employee, ideally in a senior position, better still as an owner
- Experience of and talent for providing friendly, efficient customer service
- Willingness to work long hours and at weekends
- Strong commercial and marketing acumen
- Basic handyman skills will help the hands-on owner - more likely for a small hotel or guesthouse - deal quickly with malfunctioning toilets, broken furniture and the like
The good news is that "foreign investors experience a buyers' market in which supply exceeds demand, giving purchasers an advantage over sellers in price negotiations" - according to an article published in December 2016 by Thai law firm PUGNATORIUS Ltd.
However, therein lies a risk for hotel buyers: "That an enormous number of hotels are changing hands is not at all a sign of growth and international expansions," warns PUGNATORIUS.
Nevertheless, bargains are there to be had if you can spot potential in an ostensibly so-so asset. The country is, after all, flourishing economically and the tourism industry in particular is thriving.
The 'Land of Smiles' welcomed a record number of foreign tourists in December 2017, a 16% jump year on year, according to figures from the Tourism Ministry.
Popular with backpackers on tight budgets and discerning, affluent holidaymakers alike, there's plenty of custom for budget hotels, five-star properties and everything in between.
The capital, Bangkok, and Chang Mai, the third biggest city, attract huge numbers of both tourists and business travellers. And there are numerous islands on both the Andaman coast and Gulf of Thailand that cater mostly to backpackers, while large resorts like Phuket and Koh Samui tend to attract package holiday tourists.
At the time of writing, hotels for sale in the country on BusinessesForSale.com range from US$3,676 leasehold for a seven-room guesthouse in Patong Beach, Phuket to US$552,027 leasehold/US$11,960,600, real property, for a 129-room Phuket property with a roof-top swimming pool and a 60-seat restaurant.
Freehold properties, meanwhile, start at the bottom end of the range with a resort and coffee house in Chiang Mai for an asking price in the region of US$100,000-$250,000. The most expensive is a cool £95 million for a 250-plus-room four-star resort with private beach in Phuket.
If you're on a tight budget then you'll find that hostels and guesthouses tend to be cheaper.
Yulia Askhadulina, a lawyer for Thai law firm Siam Legal, notes that buying a hotel with 100 rooms or more with investment capital of at least 500 million baht will qualify you for tax privileges through the Board of Investment (BOI).
Depending on the location and project, foreigners may even be allowed to hold a majority of shares (there are tight restrictions on foreigners being majority owners, apart from US citizens).
Assessing a hotel for sale
PUGNATORIUS urges buyers to eschew "legally distressed hotel properties".
With this in mind, here's a checklist of information the Bangkok-headquartered firm recommends you obtain to "avoid time-wasting discussions with brokers and hotel owners" when appraising hotels for sale:
- Hotel name, number of rooms, trademark protection
- Corporate entity, date of establishment, shareholders' background
- Date of land acquisitions, land title deeds, lease agreements, household registrations
- Permits for building construction (including application date), maids quarters, guest accommodation and facilities like swimming pools
- Environmental impact assessment documentation (for more than 80 rooms)
- Licences for hotel business, restaurant business, seminar rooms, entertainment business (with application and expiration date)
- Liquor and tobacco licences
- Hotel management agreements and similar arrangements
- Software licences and agreements with marketing websites
- Any other commercial agreements like maintenance and cleaning service agreements
Beware of short leases because renewing leases isn't necessarily as straightforward as it is in the west.
And if lease values have soared in the years since you bought the business - as has happened in some of Thailand's rapidly developing resorts - you could find your healthy profits eroded to wafer-thin margins.
The licences you need to operate legally depend on what facilities and services you offer or intend to introduce. A hotel with more than four rooms or that accommodates more than 20 guests must secure a hotelier's licence - from the Department of Provincial Administration for hotels in Bangkok if your hotel is based in the capital, or from the relevant regional provincial governor's office.
A permit for selling food, liquor and cigarettes is required if you operate a restaurant or catering services, while an entertainment permit will allow you to host conferences or operate pubs, clubs, bars and spas.
Why you need a good lawyer
If you're thinking of hiring a lawyer on the cheap or even winging it without legal help, just consider this non-exhaustive list of legalities you'll have to navigate, courtesy of PUGNACIOUS Ltd:
- Development of an appropriate acquisition structure under foreigner legislation
- Due diligence - corporate and property
- Zoning, bylaw and regulation survey
- Drafting and negotiation of contract
- Resort development and construction
- Hotel business licence application
- Hotel and villa management agreements
- Finance and restructuring
- Registration and transfer of legal ownership
- Tax advice and planning