'owning' A Hotel Business

[bannangio]

Hi all,

I'm planning on opening a small hotel in Thailand in the near future. However, I don't want to rush into anything unless my ownership will be reasonably secure.

So, after looking at the legal issues this is the 'plan':

1. Open a 100% foreign owned hotel management business (with me having the controlling share).

2. Get a usufruct on the desired piece of land, in the name of this company. (The idea being that a usufruct is for life, but the company will not 'die' unless it is dissolved, as i can will my shares to children etc.)

3. Build the hotel building, either in my name or in the company name.

4. Open the business, and make lots of money.

And then possible in the future:

a. Get Thai citizenship.

b. Get the usufruct cancelled, and the land transferred into my name.

Thoughts? Problems? Anyone else been through a similar process?

[dsfbrit]

Wow - lots here.

To start with - I wish you good luck.

I am no expert, but:

100 percent foreign owned - we would all like to do that - the number of Thai shareholders you now need has been reduced to 3? I believe, but thats about the best you can do for a Ltd company.

I was told by Sunbelt that if the land is in the company name, then the dwelling (in my case house, in your case hotel) has to be as well. Mind you, this may not be the case for certain types of business - you need to check.

I am in the process of closing down a company, setting up a Usufruct in my wife's name on the land and the house in my name. This can be done for sure.

If you are a Thai, ie: have mother or father as a Thai, then you can achieve citizenship with relative ease. Otherwise Permanent Residency is the best you can achieve.

There is a thread on Permanent Residence and how you can qualify here on Thai Visa. Its not that easy, but if you learn to speak, read and write Thai, pay taxes and have a business as you suggest you will run, then it can be achieved.

If I were in your position, I would spend a lot of time searching the other forums on Thai Visa with the relevant keywords (I expect you are doing this already), for example there are threads on the Visa Forum about citizenship. There is some really good information out there...

Good Luck

Edited August 4, 2008 by dsfbrit

[quiksilva]

You can certainly have a 100% owned hotel management business, (not list 3), but that same company can not also be in the business of owning a hotel. There is a distinction.

I am also not quite sure how they will view owning an usufruct interest in the property, but it seems likely that they will take a similar view and say that its beyond the scope of a management company.

It is more usual to have a holding company that owns the hotel, which must be 51% Thai. This firm then assigns a management company (which can be 100% foreign owned) to run it.

If you plan on opening a hotel, go big, make sure it has at least 100 rooms and in an area where the government is trying to promote tourism, and apply for BOI promotion, so that you can own the freehold interest and manage the hotel and be 100% legal and above board.

Edited August 4, 2008 by quiksilva

[Samuian]

...and this is only part of the set up, running it and be successful is a complete other story!

The tourism industry has it's pitfalls like any other Industry.

This year the petrol prices... general cost increase...

good luck - you need it!

[lardy]

Be aware that in many hotels I have stayed in they are almost dead midweek and packed at weekends.

[quiksilva]

True but 40-49% Gross Operating Profit is also not unusual.

[bannangio]

Quiksilva, you make a very good point.

In theory, who would decide whether it was within the remit of a hotel management company to also hold a usufruct on the land the hotel is built on? I imagine I need to contact a lawyer to find out the exact legalities. As you say, a 49%/51% company is also a possiblity, but I'm not keen to go this route with the supposed crackdown on nominee shareholders.

BOI approval would be perfect but is unfortunately not an option for me - I'm not willing to invest the amount required for a 100 room hotel on my first venture into this area. I think it'll be best for me to start with a small hotel - if I'm successful I can expand, if not I can walk away without too much heartache.

Samuian and Lardy - I've done some quick sums and needless to say think I can make a profit, which is why I'm looking into this is further detail.

Dsfbrit - Thanks for the heads up on PR/citizenship. Hopefully it shouldn't be too difficult if all goes to plan, just a case of jumping through all the hoops they set up and waiting? I already speak, read and write Thai, and plan to pay myself a high enough salary that my tax payments are more than adequate.

Thanks all for your help

[henrytuttle]

This has been a dream of myself and my business partner for quite some time.

However, the land ownership problem is VERY substantial. Many of the hotels I've heard of barely make any money but end up doing okay because of the land appreciation. Consequently, if you struggle for 20 or 30 years and the land value goes up 10 fold but you have trouble getting the benefits from the real estate, it's hardly worthwhile.

I was considering putting together a resort hotel in Vietnam (approx. 100 rooms) but it seems like Vietnam's real estate has become too expensive. Now I'm looking at Cambodia. But to be honest, I know ABSOLUTELY NOTHING about investing in those countries.

Ideally, my retirement would be owing a nice boutique hotel on the beach and just being able to cover the "mortgage" on the hotel (I'd probably borrow a large portion of the money). Then, I'd live off the money from other investments. Myself and my partner were planning on spending substantial money on purchasing holiday houses on the beach anyway, so it would be great seed money for the hotel.

Good luck to you. Send me a message if you work everything out. I'd love to pick your brains.

[bannangio]

Sounds like a nice retirement plan there Henry

Will let you know how I get on, but it'll probably be at least a year before things get moving properly, provided I'm happy with what my research uncovers.

Does anyone have a usufruct in a company name? Am I right in thinking that theoretically this usufruct would last until the company is dissolved, even if that was in, say 200 years time?

[Khun Jean]

A usufruct for a company will be 30 years*. But why not have the company own the land?

* Check this with your lawyer as i had conflicting information about this.

At this time the 'score' is 6 lawyers say 30 years and 2 say it is for the duration the company exists.

Edited August 5, 2008 by Khun Jean

[bannangio]

Khun Jean,

The idea was to give the usufruct to a 100% foreign owned company, which would otherwise be unable to hold land in Thailand. If this usufruct does indeed last until the dissolution of the company, me and my descendants would have control of the land for ever, provided the company remains solvent.

If however, a usufruct given to a company expires after 30 years, there is little benefit in going the usufruct route over a 30 year lease.

As the lawyers you mention have different points of view I take it this has never been tested in court?

[ThaiPauly]

I too wish you good luck,

But remember the main issue will always be "Location, Location, Location.

Up here in CM the Shangrila Hotel opened about 6 months ago boasting the largest conference room in LOS ...EVERY time I have driven past since it looks absolutley deserted ! Nobody going in or out. Must have cost hundreds of millions of baht to build it, Luckily they can afford to swallow the loss, the Chedi is almost the same, within a month of it opening the floods came and closed it down for another 6 months.

It takes balls to open a business in LOS, again I wish you luck.

I reckon I am pretty close to being the number one expert on "failed businesses in Thailand", having had 4 atempts, luckily for me I never invested more than I could afford to lose, so now I am retired even though I feel I am a bit too young (54), I am just not prepared to risk any more money here.

Having said this, I DO KNOW people that have made it here...unfortunatley I was not one of them, luckily for me I made my dosh in the UK and sold up.

[Sunbelt Asia]

Dear Bannangio,

For your information, Thai citizenship can be obtained under the following conditions:

At least 3 consecutive Non-Immigrant B or Non-Immigrant ) visa extensions

In the case of a Non-Immigrant B visa, applicant must be able to prove that he or she has paid taxes for this duration on a salary of at least 80,000 Baht

In the case of a Non-Immigrant O visa, taxes must be able to prove that he or she has paid taxes for this duration on a salary of at least 30,000 Baht.

For more information, please contact Sunbelt Asia on 02-642-0213.

Best regards,

Foreign Business Advisor

Sunbelt Asia Co. Ltd

www.sunbeltasia.com

[email protected]

Edited February 12, 2010 by Sunbelt Asia

[Kf6vci]

I would KISS and live with the knowledge that the land is not owned, only leased for 30 years with an option for another 30 years.

What do your projections say? Cash flow and financing?

There are alternatives, like buying some American Mortgage REIT, then sell call options. for a yield of ~ 18% with no corporate taxes. So - if you are affluent and don't need bank financing, there are alternatives without all these hassles. www.bigcharts.com check some symbols or the I-Shares ETF REM. (only ~ 13.5% yield with 0.5% fee). ANH NLY MFA CMO CYS, to give you an idea.

The crisis isn't over - so you think what LOS needs is another hotel? Hope you can pull this one off and differentiate yourself sufficiently.

Chris

[CWMcMurray]

I would hate to contradict the Legal advisors above, but I believe the process is much more complicated than that... If he a "male" then he will need to apply for PR first and once aproved for PR he will then need to apply for Citizenship.

Last I heard no one has been aproved for PR since 2006....

If he was a women married to a Thai man then it is much closer to your post as foreign women do not need to get PR first. I also do not believe that women will have any income requirement either.

This being said, women still need to wait a lonnnnng time... I do not know the number of years, but I remember reading posts on here of Women or Husbands with wives going through the process who have turned everything and have been waiting a couple of years already with no news.

[p_brownstone]

Dear Bannangio,

For your information, Thai citizenship can be obtained under the following conditions:

At least 3 consecutive Non-Immigrant B or Non-Immigrant ) visa extensions

In the case of a Non-Immigrant B visa, applicant must be able to prove that he or she has paid taxes for this duration on a salary of at least 80,000 Baht

In the case of a Non-Immigrant O visa, taxes must be able to prove that he or she has paid taxes for this duration on a salary of at least 30,000 Baht.

For more information, please contact Sunbelt Asia on 02-642-0213.

Best regards,

Emile de Marsac

Foreign Business Advisor

Sunbelt Asia Co.

www.sunbeltasia.com

Absolute nonsense!

There is FAR more to the process of obtaining Thai citizenship!

Patrick

[Changian]

How dare you doubt the advise given by a Foreign Business Advisor. I'm sure Sunbelt wouldnt llow anything that wasnt true to be posted in their name. Maybe Emile can tell us if any other documents are required other than passports and three years tax receipts in order for Sunbelt to obtain Thai Citizenships for us. Seems simple enough.

[Totster]

Dear Bannangio,

For your information, Thai citizenship can be obtained under the following conditions:

1. 
   

At least 3 consecutive Non-Immigrant B or Non-Immigrant ) visa extensions

In the case of a Non-Immigrant B visa, applicant must be able to prove that he or she has paid taxes for this duration on a salary of at least 80,000 Baht

In the case of a Non-Immigrant O visa, taxes must be able to prove that he or she has paid taxes for this duration on a salary of at least 30,000 Baht.

For more information, please contact Sunbelt Asia on 02-642-0213.

Best regards,

Emile de Marsac

Foreign Business Advisor

Sunbelt Asia Co.

www.sunbeltasia.com

Absolute nonsense!

There is FAR more to the process of obtaining Thai citizenship!

Patrick

The way I see it, he wasn't describing the process, but outlining some requirements

Totster

[manarak]

Maybe contact a Thai company/businessman doing business in a western country and owning real estate there.

Then make a swap.

[kiwiinasia]

Dear Bannangio,

For your information, Thai citizenship can be obtained under the following conditions:

1. 
   

At least 3 consecutive Non-Immigrant B or Non-Immigrant ) visa extensions

In the case of a Non-Immigrant B visa, applicant must be able to prove that he or she has paid taxes for this duration on a salary of at least 80,000 Baht

In the case of a Non-Immigrant O visa, taxes must be able to prove that he or she has paid taxes for this duration on a salary of at least 30,000 Baht.

For more information, please contact Sunbelt Asia on 02-642-0213.

Best regards,

Emile de Marsac

Foreign Business Advisor

Sunbelt Asia Co.

www.sunbeltasia.com

Absolute nonsense!

There is FAR more to the process of obtaining Thai citizenship!

Patrick

Patrick is RIGHT.

Sunbelt are talking about Residency or Permanent Residency to be more precise.

Sunbelt should correct the post as they appear to be misleading people by the typo they have made.

Citizenship comes well after PR, and in fact is very rarely given to farang. Apparently only 10 or so are given out each year.

Edited February 11, 2010 by kiwiinasia