An aerial view of high-rise residential and office buildings in Bangkok in June 2024. (Photo: Nutthawat Wichieanbut)

Hotel operators are concerned about changes to foreign ownership rules for real estate because they believe it could lead to another influx of illegal hotels in Thailand.

The government’s real estate stimulus proposal aims to extend the leasehold period to 99 years for foreigners, while increasing the quota for foreign ownership of condominiums from 49% to 75% of usable space in a building.

These proposals would worsen the competitiveness of Thai hotels because they would encourage foreign home buyers to exploit Thai tourism, said Udom Srimahachota, vice-president of the western chapter of the Thai Hotels Association (THA).

Mr Udom said that with more ownership allotted to them, there was a greater chance that buyers would convert condo units to rent out to foreign tourists.

For instance, Chinese nominee agents might purchase an entire floor in a condo project and rent all the rooms out to only Chinese visitors in major tourism provinces, which has occurred in the past.

He said Thai hotels typically face higher expenses, such as land and building taxes and corporate taxes, compared with non-licensed rooms.

In Thailand there are about 16,000 registered hotels and roughly 15,000 unlicensed hotels.

In Hua Hin, a low-rise condo project was purchased in high volume by Russian agents, then rented out exclusively to Russian tourists, competing with local licensed hotels, said Mr Udom.

If other cities such as Bangkok or Chiang Mai, which have direct flights to Hua Hin, increased flights from China, making them a key destination for mainland tourists, Hua Hin might also lure Chinese buyers who would like to illegally use their investment for tourism purposes, he said.

Likewise, a longer leasehold period for foreigners who purchase land plots in Thailand is questionable, said Mr Udom.

Thailand has already seen a growing number of Chinese nominees developing housing or condo projects, as well as hotels, he said.

Mr Udom said they would directly import workers and construction material from China, targeting the Chinese market, which means the local economy does not fully benefit from flourishing tourism income.

He said the THA had already voiced its concerns to the Interior Ministry, urging the government to prioritise improving Thai hotel competitiveness.

The government should help unlock financial restrictions to allow small and medium-sized operators to access loans, as independent hoteliers still struggle to obtain funds to refurbish their assets, said Mr Udom.

The administration should also accelerate the regulation of small properties rented out to tourists, previously classified as non-hotels, registering them in the system, he said.