The Family Is Looking At Buying A Hotel. Need Advice.

[LOS4words]

My family and i are looking at moving to Thailand and buying a Hotel business.

We are willing to invest approximately 25m Bath but less would be preferable, to have a comfortable buffer.

We are looking to buy in Samui, Phanyang, Phuket and perhaps the outlying islands. Other "beach resorts" might be interesting to.

Ideally we would want to convert some of the rooms to permanent living quarters for the family however i do not know if this will pose some kind of legal problem.

I have been trying to read up on some basic Thai Law etc but i would very much appreciate some input from you people.

First am i right assuming that a foreign entity can own 100% of a Hotel business? And if so does that mean i can pretty much buy and own the property indefinitely? Or should i still go for a lease?

If i opt to buy hotel with a 10 year lease, what will happen at the end of the lease? Can i renew? Will my initial cash investment be totally forfeit?

My Parents will basically only be there to relax and enjoy their pension (and be the majority shareholder/owner). Can i as a farang work as an employee of my parents as a hotel manager or vp of operations or whatever?

How many farang employees can we have, if any and how many thai nationals do we have to employ?

Finally from a business standpoint, would it be better to just get a cheap lease and pay rent etc for a duration or fork out the big bucks?

Our aim is to have a secure business that affords us a comfortable lifestyle, and if all goes well after many years maybe be sold for some profit.

I realize that all this sounds haphazard, but I'm merely trying to get some meat on my bones before going back to Thailand to speak with real estate agents/lawyers and business consultants etc.

Thank you for your time.

/Christian

Edited July 6, 2006 by LOS4words

[Chang_paarp]

Christian

As a falang, you can own the hotel management business 100%, but you cannot own the property, or (I think) the building.

With the sort of investment you are taking about you can get work permits for yourself and your parents if you want. It may be easier for them to be there on a retirement visa if they do not want to work.

Sunbelt Asia (click here) who is one of the sponsors of this site usually has several hotels and guest houses for sale on their site. That can give a range of ideas for cost.

Greg Lange the GM is active on this forum and may chime in with advise.

There have been a couple of threads on hotel ownership recently so if you use the search function you may get some more information.

[Sunbelt Asia]

Chang_paarp Thanks for mentioning us. Much appreciated.

Ideally we would want to convert some of the rooms to permanent living quarters for the family however i do not know if this will pose some kind of legal problem.

It won't.

First am i right assuming that a foreign entity can own 100% of a Hotel business?

Most foreign entity do not and are not allowed to. Exception would be Americans or if you are under the BOI ( which requires a minimum of 100 rooms) In this exception, American would need to lease the land

However, no matter what nationality, you can own 100% of a hotel management company and the building.

And if so does that mean i can pretty much buy and own the property indefinitely? Or should i still go for a lease?

Only under BOI can you own the land. You will need to lease the land otherwise.

Can i as a farang work as an employee of my parents as a hotel manager or vp of operations or whatever?

Yes but if they are a director of the company. They need a work permit as well. If you are running the show, best for you to be the director. If they are going to work, then that's a different story.

How many farang employees can we have, if any and how many thai nationals do we have to employ??

You can have up to 10 foreigners for a Thai Limited company. You do not need to employ any Thais to obtain the work permit.

However if you are applying for the extension of stay based on business, then you will need to employ 4 Thais per work permit. Different department and different rules)

If i opt to buy hotel with a 10 year lease, what will happen at the end of the lease?

If you don't renew. You must move out.

an i renew? Will my initial cash investment be totally forfeit?

To renew depends how well your contract is written and their are no guarantees. Much better to do a 30 year lease.

Finally from a business standpoint, would it be better to just get a cheap lease and pay rent etc for a duration or fork out the big bucks?

I'm not aware of any cheap leases unless it is a small guesthouse. Real estate is expensive in Thailand like it is anywhere in the world. In some areas, real estate cost much more here.

Leases and buying the business have a higher ROI than a purchase of land and purchase of the business with BOI.

We have a wide selection of hotels and guesthouses you can own at www.sunbeltasia.com We have 5 Sunbelt offices in Thailand. By chance if you find Thailand is not the place to call "home" Sunbelt has 400 offices worldwide to help you.

For legal advice, we have a seperate department at www.lawyer.th.com

[LOS4words]

Thanks alot for the reply. If you guys have an office in Phuket ill drop by and we'll talk.

[Khun Jean]

I would suggest when a lease is taken to go for the longest period possible. 30 years sound good. 10 years is probably just enough to recoup the investment. Law is very different here than in the west, lease renewals are sometimes 'difficult'.

I have spoken to some owners on Samui last year with smaller resorts that are running out of lease 'time'. The prices they now have to pay are at least 10x more than when they started. A lot has changed of course in the last ten years, but what about the next 10 years?

A keymoney of 2 million baht paid and a rent of 50.000 baht a month to be increased next year to 20 million baht keymoney and 200.000 baht a month. My estimate of the owner (which can be way off) was that they are unable to cough up 20 million and are certainly unable to make a profit even with 100% occupancy. It would require a total rebuild and going up from 2-3 stars to 5 star.

The not so long lease is the killer for a running company. One of the reaons why many resorts are rundown. It is just not worth it to upkeep it the last few years.

For Samui and Phuket you are at least 5 years to late. 25 million will be just enough to pay the keymoney or rent in advance as some people call it. Leaves little for something else.

Buying land would be the best option, as a company you would be able to althoug not easy. Even if it is a little from the beach where prices are more 'normal' you can have good occupancy rates if you offer a good deal. I think for 25 million you can build quit a nice hotel.

I think 3 or 4 levels is the maximum height nowadays.

My feeling about it is if you can't own the land, why bother. There are other places in the world where you can really own land or have good, extendable and enforceable long term leasecontracts.

You can also just put the 25 million in some property back home and live generously of the rent in Thailand, with free time to enjoy yourself.

Even putting it on the bank and getting 5% interest will give you 100.000 baht a month to spend AND still keep the 25 million. A 100k a month goes a long way in Thailand, a very very long way.

It is al up2u as they say here in Thailand. But remember Tit!

Edited July 8, 2006 by Khun Jean

[visarunner]

On top of the good advise from Sunbelt and the valuable comment by Khun Jean pls remember that setting up a business is tough, specially in Thailand where it is seams easy in the beginning , but Hotel's are very tricky , due to a long low season and a short high season , unless you have a top location.

It's easy to live here , but very difficult to make money.

[nev]

On top of the good advise from Sunbelt and the valuable comment by Khun Jean pls remember that setting up a business is tough, specially in Thailand where it is seams easy in the beginning , but Hotel's are very tricky , due to a long low season and a short high season , unless you have a top location.

It's easy to live here , but very difficult to make money.

true very hard to make money in thailand,seams a ot of hassle to me.

just invest the money and retire happy no stress and enjoy life,well thats just me.

i work to live not live to work, 25 million i would not work again. nev

[Sunbelt Asia]

Thanks alot for the reply. If you guys have an office in Phuket ill drop by and we'll talk.

Royal Phuket City Hotel

154 Phang-Nga Rd. Tambon Taladyai, Muang,

Phuket Thailand.

Office Phone +66 (0)76 233 333 ext 3618,

Fax +66(0)76 233 343

http://www.sunbeltasiagroup.com

[simon43]

Some input from Phuket. We have almost finished building a small hotel on leased land. The contract period is 15 years, with no definite option to renew.

The hotel has 10 rooms and the usual on-site amenities such as swimming pool, bar, restaurant etc.

The monthly land rent is 50,000, increasing by 10% every year, but capped at 100,000 baht per month. There is no key-money.

The location is just a few hundred meters from the airport and the local beach.

My wife found this little piece of land and we did the sums to see if it could make a profit over the 15 year period.

Currently, Phuket hotel room occupancy is running at about 65%, averaged over the year.

Typical price per room per night in Phuket is 3,000 baht. (I'm not talking about backpack rooms...) Price is maybe 2,000 baht in the low season.

So, assuming s pessimistic 50% occupancy rate and a 6 month high season, that will give a revenue per year of 5.85 million baht. (I'm excluding extra income from the restaurant etc).

How much does it cost to build 5 double-bungalows, gym, swimming pool, bar and restaurant?? You might be surprised! Using experienced labour from my wife's Issan family, we are looking at about 3 million baht total, and that includes 800,000 baht for the swimming pool. (If you don't believe me, I'll show you the bills...)

So, if my 15 year income is 15 * 5.85 million = 87.75 mb. Less the build costs and rental gives us about 65 million baht or so...Then we need to factor in salaries and depreciation etc etc.

But, the bottom line is that we can make a decent profit from this family business. The initial outlay is relatively small, and I don't have to think about land ownership issues.

Simon

[rishi]

One staff at 5-8,000 a month, should be able to keep those 10 rooms tidy... So, in essence you're talking about making about 3.5 - 4 M a year on an initial investment of about 3 M baht?

I must admit, haven't got much insight into hotel business, but that calculation sounds way too optimistic to hold water.

[swissie]

LOS4words: You seem to be a so called "financially independent person", that absoluely has no need to rush into "buying the family a hotel".

Try this: Stay in Thailand for a year as a tourist and do nothing, exept doing your homework as far as "buying your family a hotel".

After having done your homework (on the spot, in Thailand), your desire to "buy a hotel for the family" will probably be greatly reduced.

If "the family" dislikes this idea and the concept: Get a new "family"!

Luck to you!

[bkkmadness]

LOS4words: You seem to be a so called "financially independent person", that absoluely has no need to rush into "buying the family a hotel".

Try this: Stay in Thailand for a year as a tourist and do nothing, exept doing your homework as far as "buying your family a hotel".

After having done your homework (on the spot, in Thailand), your desire to "buy a hotel for the family" will probably be greatly reduced.

If "the family" dislikes this idea and the concept: Get a new "family"!

Luck to you!

Try this Swissie : READ THE POST!

His family are his mother and father who are buying the majority of the hotel where he wishes to work as an employee whilst they enjoy retirement.

It might be difficult for him to ask to be put up for adoption and get a new family but I'm sure the OP will certainly take the idea on board.

[visarunner]

Despite different opinions about how to spend money I would still recommend to contact/work together with Sunbelt.

Good Luck , why not try a place when is guaranteed frequency?

THB 25 Mio can go a long way in LOS.

Edited July 9, 2006 by visarunner

[simon43]

Rishi - The figures are based upon data from other hoteliers in the immediate area, tourist statistics from the Phuket Tourist Board, and building materials/labour costs that I am being charged right now as the hotel is built.

I have already factored in the cost of the architect. Unlike many who would charge a % of the build costs, this architect has only charged us for preparing the full set of construction plans and getting these fully approved.

I have to say that a 'newcomer' would not be able to achieve the same low build costs! We were quoted a build cost of 10 million baht by external companies. (So you can imagine the profit margin they are using when they have a 'farang' customer)

Staff in the hotel will all come from my wife's family. (Many of them have been working in our BKK bars for a couple of years, so we get on well).

Of course, to achieve the profits that I have stated, you need to have good marketing of your hotel etc etc. That could costs a lot of money. But luvkily I am an internet guy and can maximise the exposure of our business for a low cost.

Anyway, fingers crossed!

Simon

[~G~]

You probably know Phuket better than I do. But anyway -

Typical price per room per night in Phuket is 3,000 baht. (I'm not talking about backpack rooms...) Price is maybe 2,000 baht in the low season.

Plenty of hotels for less than that, have a look in Phuket Hotels, you'll find around 100 hotels in Phuket now offering rooms for less than 1,500 baht, most of them have similar facilities to what you mentioned and not worse locations.

Those that offer rooms for 5,500 baht in the peak season seem to offer them for 2,000 baht in the low season. Those that offer them for 3,000 baht in the high season offer them for as low as 1,000 - 1,500 baht in the low season...

How much does it cost to build 5 double-bungalows, gym, swimming pool, bar and restaurant?? You might be surprised! Using experienced labour from my wife's Issan family, we are looking at about 3 million baht total, and that includes 800,000 baht for the swimming pool. (If you don't believe me, I'll show you the bills...)

I hope you will manage to stay within this budget, since consturction projects are notorious for budget overruns, even when professionally planned and excuted.

Edited July 10, 2006 by ~G~

[simon43]

Hi G, thanks for your comments.

The room price that I quoted was from a couple of small hotels near me. One of them charges 3000 baht per night and is already fully booked for every week in the high season. (I know this is true because I i used to eat in this hotel last high season ...)

The other hotel has fewer facilities that ours and charges 5,000 baht per night. It also has many guests.

There is certainly a market for cheaper (and more expensive hotels). The nack is identifying your potential customers and understanding what they want from a hotel and how much they will pay for this etc.

Re the building costs, we are about 80% completed, with no major over-runs on cost so far, (which is actually quite a surprise...)

Simon

[LoveDaBlues]

One staff at 5-8,000 a month, should be able to keep those 10 rooms tidy... So, in essence you're talking about making about 3.5 - 4 M a year on an initial investment of about 3 M baht?

I must admit, haven't got much insight into hotel business, but that calculation sounds way too optimistic to hold water.

I invested a small amount of money in a biz for the wife's family. In a little less than 3 months had made back all the capital investment + 25%. The business can't keep up with the demand so I've forked over more capital to expand. If things go well I will expand to a MUCH larger market and I expect to gross between 3-6,000 USD per month.

There are ways to make money in Thailand. I was skeptical but after a year of living here you just gotta find the right path and go for it. Simon43 has a lot of experience in Thailand. I think he will do very well in Phuket. I've never been to Phuket but will probably make it down there someday and hope to stay at his hotel. I like the smaller hotel operations like this; there is one in Udon Thani with 10 rooms and the staff are great....it's cool to see the same people year after year makes it a more personal experience. I'm renting a house now but still drop by from time to time to visit and share a cup of coffee.

Simon, can I have the President suite LOL?

Steve LDB

[simon43]

Simon, can I have the President suite LOL

No chance - that's my room ....

[LoveDaBlues]

[GuestHouse]

It's great to read both sucess stories and people who are making a go of their life givnig such possitive advice to others.

The best of TV.

[Khun Jean]

I know Simon will pull it off. But don't forget he was in the bar business before, has a Thai wife and a lot of experience under his belt.

I remember from reading posts that Simon first planned something on Samui looked around and then decided to go to Phuket.

Maybe changing the idea of this hotel business and the way it should look many times depending on the surroundings and other hotel in the neighbourhood, and the targeting of different types of tourist changing every time.

Now how would someone with no Thai relatives and no experience in Thailand like the OP do that. I think by first making a few mistakes before getting it right. And those mistakes can be very costly.

I suggest to the OP to do things in the right order. First research your visa options, then the workpermit problem. Then the Thai shareholders problem, the location problem, the buying of the land problem, the building problem, the fitting out problem, the insurance problem, the employee problem, the bookkeeping problem, the maintenance problem, etc... All these 'problems' can be very big without experience in Thailand. If you live here and have business experience some of those problems are easily solved, other will always be difficult.

Once you are here for a while and study those problems, and do a lot of research about prices and possibilites those problems can change into oppertunities. When you have no experience then you will be unable to recognize them.

Of course it is not impossible, but like businesses in every country, the ones who prepare and have some cash for bridging unfortunate times are the ones that will grow into a successful business.

My Parents will basically only be there to relax and enjoy their pension (and be the majority shareholder/owner).

Majority is Thai owned. And why not have the parents relax and enjoy their pension here without all the hassle a Thai business will bring.

Edited July 11, 2006 by Khun Jean

[simon43]

Khun Jean is right. I have lived in LoS for a few years, speak/read/write reasonable Thai, have a 'decent' Thai wife etc etc.

BUT . . I have made mistakes in the early days and lost a few million baht in the process. Yes, I owned 2 bars in BKK. But one I lost money on because the rent was too high for the location. The other is doing ok. I also had a coffee shop and lost money on that!!

So, I'm actually a bit of a loser But I have been lucky that I had another UK business which was making money, so I could afford to take the risk..

You need to ask yourself if you can afford to take such a risk. Maybe you will be lucky first time and get a profitable business. Or maybe you will be 'stung' by some unscrupulous person, or just misread your market, and lose the lot!

Take care

Simon