Starting A Hotel Business, Good Idea?

[leuven1]

My (Thai) wife and I (Farang) want to built or buy a hotel (50 rooms) in Thailand. We're looking for some advise from experienced entrepreneurs who have taking this path before and learn from their experience. I am particularly interested in advise on the required licensing.

I was advised that the "owner" does not need a license but that the license to operate can be held by the "general manager", true?

Appreciate your insight and advise.

[Chang_paarp]

Leuven1

Hotels are a good business in most parts of the world, if they are well managed, this usually means using people that are experienced, and having enough business experience and cash to get to profitability. Under capitalisation is a major cause of business failure, this is an unpleasant experience I have had.

In your post you missed out some vital information, that can change the advise you recieve.

Where are you from?

Do you have experience in the hotel industry?

What sort of budget do you have?

Which market are you trying to operate in?

Where do you envisage building/buying/operating this hotel?

If you look at the Sunbelt web site they have several hotels and guest houses available. They are a sponsor of this site and the owner may chime in with his advise.

Edited June 16, 2006 by Chang_paarp

[SunbeltAsia]

Thanks Chang_paarp for the reco.

Here are my thoughts. Hotels indeed are a good business in Thailand. On average, they have 65% gross profit margins in Thailand, which is higher than in most countries. The reason why is labor. Labor costs are much less than in Europe or the USA. I know as I own 5% of three Hotels in the USA, and the labor costs is simply insane!

Bill Heineke is one of the most successful entrepreneurs in Thailand of all time, in his book that he published, 21 Rules to Being a Successful Entrepreneur, stated he felt that hotels was one of the best ways to make money in Thailand along with the pride factor, it was hard to beat combination. Of course tourism is always affected by one thing or another, such as SARS, the Bird Flu, terrorism, tsunami. Interesting that a number of the big hotel chains in Thailand, had a record year in spite of the tsunami and they had properties in Phuket.

I have found the scale of having over 15 rooms was a big positive as you had have the labor anyway. Even if it is much cheaper than the West, there is a cost involved.

Buying a Hotel business makes more sense than building one as evidence by the Central Group buying two large Hotel Properties in the last 90 days. The Construction costs because of oil prices have made building a hotel more expensive than buying a existing hotel. Add to it, that the current hotel has goodwill and a client base, most experts would agree that a person would need to be open minded and look at the options. The other big advantage is you know what your costs are going to be, unlike building a hotel. They will almost always go over budget

By the way, Most people are not aware that a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry. There are no requirements of having just 49% of the shares. Of course with this set up you would need to have a long term lease on the property.

[ThaiPauly]

By the way, Most people are not aware that a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry. There are no requirements of having just 49% of the shares. Of course with this set up you would need to have a long term lease on the property.

That is a very interesting point you make which many people probably don't realise.

But where do you draw the line between a Guest House and a Hotel?

Do BOTH Qualify?

Or is the difference set by the number of rooms within it's walls?

Cheers

TP

[SunbeltAsia]

By the way, Most people are not aware that a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry. There are no requirements of having just 49% of the shares. Of course with this set up you would need to have a long term lease on the property.

That is a very interesting point you make which many people probably don't realise.

But where do you draw the line between a Guest House and a Hotel?

Do BOTH Qualify?

Or is the difference set by the number of rooms within it's walls?

Cheers

TP

The Thai definition is over 12 rooms to be rented to guests, is a Hotel.

[samran]

By the way, Most people are not aware that a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry. There are no requirements of having just 49% of the shares. Of course with this set up you would need to have a long term lease on the property.

Then why did the Australian FTA with Thailand make such a song and dance about this?

From: The Australian Department of Foreign Affairs and Trade

Thailand will permit majority Australian ownership of major restaurants or hotels (up to 60%). The previous limit was 49.9%.

I'm sure you are very right sunbelt, just that did the Australians get bad advice which let the Thai's give away nothing for something during negotiations?

[SunbeltAsia]

By the way, Most people are not aware that a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry. There are no requirements of having just 49% of the shares. Of course with this set up you would need to have a long term lease on the property.

Then why did the Australian FTA with Thailand make such a song and dance about this?

From: The Australian Department of Foreign Affairs and Trade

Thailand will permit majority Australian ownership of major restaurants or hotels (up to 60%). The previous limit was 49.9%.

I'm sure you are very right sunbelt, just that did the Australians get bad advice which let the Thai's give away nothing for something during negotiations?

Restaurants of course they did a good job on negotiations.

As for hotels, the restrictions for types of business on the Foreign Business Act and exact wording on List 3 is " Hotel undertakings, except for hotel management services"

A number of hotels have a contract with two parties. One party is needed to provide hotel management services and the other party has a long term lease and owns the building ( hotel) in their personal name ( I have heard of this as well being put into a holding company but its not needed if its a lease)

[howzzat123]

My (Thai) wife and I (Farang) want to built or buy a hotel (50 rooms) in Thailand. We're looking for some advise from experienced entrepreneurs who have taking this path before and learn from their experience. I am particularly interested in advise on the required licensing.

I was advised that the "owner" does not need a license but that the license to operate can be held by the "general manager", true?

Appreciate your insight and advise.

Hi,

I have a Hotel with 50 rooms in phuket in the main area with a restaurant with 75 seater on the ground floor. I am willing to lease it for 275,000/- per month. Please let me know. Write to me [email protected]

Regards

[hlfourie]

Leuven1

Hotels are a good business in most parts of the world, if they are well managed, this usually means using people that are experienced, and having enough business experience and cash to get to profitability. Under capitalisation is a major cause of business failure, this is an unpleasant experience I have had.

In your post you missed out some vital information, that can change the advise you recieve.

Where are you from?

Do you have experience in the hotel industry?

What sort of budget do you have?

Did you actualy read the OP message ? all the questions you ask are answered!!!

Which market are you trying to operate in?

Where do you envisage building/buying/operating this hotel?

If you look at the Sunbelt web site they have several hotels and guest houses available. They are a sponsor of this site and the owner may chime in with his advise.