TO DISCUSS YOUR PROJECT OR LEARN MORE ABOUT OUR SERVICES:

  • This field is for validation purposes and should be left unchanged.

Thailand's New 100% Hotel Foreign Ownership Incentives

Category: , Posted:19 Dec 2009 | 09:35 am

The Phuket Gazette.
Although the clogged backlog of government reforms are generally moved through at the slow, but steady pace of the winner of the famous race between the hare and the tortoise, a recent incentive shows a quickening pace.
In a recent move aimed at stimulating countries that are withholding foreign investment, Thailand's Board of Investment (BoI) has created an incentive which now enables 100 percent foreign ownership of hotels.
Under notification (10/2552), the new amendment will enable hotel developments with a minimum value of 500 million baht (excluding the cost of land and working capital) to qualify for the new program. Previously, only hotels with a minimum of 100 rooms qualified, which had negative impact on potential high-end luxury resorts in Phuket that targeted a smaller number of client?le, but with higher room rates.
The initiative is certainly good news for Phang Nga, where there was a post-tsunami ban in effect which limited the size of new hotels to 79 rooms if located within 300 meters of the sea. This effectively disqualified any beachfront hotels from BoI certification, an area where high capacity buildings are required for their economic models to work. International operators can now compete on a level playing field.
Fundamental to the BoI program as it applies to Phuket is 100 percent foreign ownership of the hotel and the land it's built on, fast processing of work permits through the Board's Bangkok office and remittance of currency overseas. For Krabi and Phang Nga, there is an extra perk, permitting tax-free importation of machinery from abroad.
It's important to note that this land ownership scheme only applies to hotels and not to residential components (such as condos), nor mixed use projects where there is the intention to sell managed villas. The ultimate aim of the BoI incentive is to spur tourism and create jobs along with sustainable hotel investment and not real estate or property.
There are significant advantages for international investors, including the ability to hold 100 percent of a Thai hotel and the land it rests on, without the necessity of forming partnerships, joint ventures or the use of nominees. Secondly, is the ability to obtain offshore debt and equity through absolute surety in Thai assets, creating options in the management of both local and foreign financing markets.
Of equal importance is attracting large international investment funds, which often have a horizon in the range of five to eight years and often have a mandate for disposition through a funding mechanism. On exit, there remains a considerably increased value in an offer for a hotel which can be wholly owned by foreign nationals, and this somewhat mitigates the market risk of having to rely only on domestic purchasers.
Eligibility for the revised incentives applies to applications made after September 14, 2009. There is a grandfather clause for existing approved projects who have yet to make use of current tax incentives. They must apply for the new program on or before December 30 this year. If not, an entirely new application process will need to be made.
The impact will certainly be felt in Phuket, where existing luxury projects such as Jumeirah Private Island and Taj Exotica had to delay development while seeking BoI status.
From an environmental standpoint, the new initiative is a positive step as developers are no longer forced to accommodate 100 units just to obtain 100 percent foreign ownership. As a result, foreign investors can now pursue smaller and hopefully greener developments.
Over in Phang Nga, including Khao Lak, the ability to attract more foreign developed luxury hotels is good news, considering the current market. The trend is currently leaning towards the mass development of midscale accommodation which primarily targets seasonal European tourists, thereby creating a wildly fluctuating high and low season.
While this is all great news for hotel investors and tourism, there remains no news on any similar stimulus for foreign ownership in the residential markets.
Going into 2010, foreign investment may begin to move back into hospitality, but for real estate developers in Phuket, there remains a defined shift in profile back to Thai nationals who are able to obtain banking support and some form of debt.
Lets hope that the new year will bring some equally good news on increasing leasehold provisions or some type of ownership initiative, something that many of Thailand's neighbors have introduced over the past 12 months.

Other News

Read more

Phuket’s World Class Creative Mad Metal Men

Category: Tourism, Posted:15 Jan 2021 | 09:15 am The Underwood Art Factory with its crazy, cool, innovative metal sculptures and fabrication is one of the island’s best global exports to some of the leading design hotels around the globe. Founder John Underwood’s long-term work with renowned design guru Bill Bensley has seen his work showcased in countless iconic locations and properties. The Underwood […]
Read more

Travel Between Bangkok and Phuket Without Quarantine Allowed

Category: Tourism, Posted:13 Jan 2021 | 10:40 am There is currently a lot of confusion on whether travel between Phuket and Bangkok is allowed, and whether a 14-day quarantine is required. The Phuket Covid-19 Information Centre have posted in Thai language only that temporary visitation is allowed (not more than 14 days). Those coming from the maximum controlled areas, high-risk areas and four […]
Read more

Is A Forced Closure Order For Phuket Hotels Needed?

Category: Hotels, Posted:10 Jan 2021 | 18:18 pm On Saturday 9th January a new order from the Phuket governor that requires a 14-day quarantine for arrivals from Thailand’s ‘red zone’ areas has thrust the island’s hotel and tourism sector into unknown territory. The impact over the past week, post-New Year on travel to the island has methodically ground down airlift to the point […]