On Thailand's touristic beaches and islands, the hotel industry traditionally consists of domestic and foreign companies who invest in a beach parcel, design and erect the hotel building, apply for the licenses and run the hotel business on their own. Many family owned businesses act as hotel developer, owner and hotel operator by themselves. Even today, such concept is successful and many of these hotels established a famous hotel brand and great local and international reputation.

Hotel management structures

However, the hospitality sector is developing and a more sophisticated design, an easier access to financial sources, a higher brand awareness and the need for an operative optimization result in new hotel business structures. The main development is the separation of hotel ownership and hotel operation. This is for decades the industry standard for European and U.S. hotel businesses, has been already realized by the world famous hotel brands in Thailand, and a sophisticated restructuring can be pretty beneficial even for existing hotels in Samui, Phuket, Hua Hin or Pattaya. 
Advanced hotel operating models can be found in three basic forms. The first type of hotel management contract is the hotel lease structure. Under such contractual arrangement the property owner leases the hotel to the hotel management company against a fixed rent or a share of the revenue generated by the tenant and operator. The operating company holds - subject to the detailed clauses of the hotel lease agreement -  the risks and control of the whole business.

The second hotel operating model is the hotel management structure. While the property owner generally takes the full scope of risks, another party is responsible for the hotel management. This general principle is typically limited by the clauses of the hotel management agreement (HMA). To agree on a proper and reasonable balanced HMA, including the base management fee and an incentive surplus, requires experience and a specific industry know-how.

The third hotel operating model is the hotel franchise. By this structure the property owner remains the hotel operator with all risks and the full control. However, he uses the brand and distribution channel of the famous hotel group against a franchise fee. The hotel franchise agreement is rather comprehensive and, if not proper negotiated, will have a significant negative impact on the hotel business operations. 

Villa management structures

It is an educated guess that 80% of Thailand's touristic beaches and islands are possessed by foreigners. In many cases the foreign investors build their own villa or acquire villas erected by a resort developer. Legal basis for such foreign property investment in Thailand is either a long-term lease contract or a corporate structure with a Thai majority shareholder. Both alternatives are fully legal, although the long term lease requires specific protection ("secured leasehold") to have the same stability and solidness.

A beach villa is typically used by the foreigner for some weeks per year only. It is economically wise to consider to let the property out to temporary guests. The marketing can be done individually or by utilizing Internet services like the American AirBnB or the German WimDu. In such cases, the requirements under the Foreign Business Act and the Hotel Act of Thailand should be carefully observed.

As an alternative, it is possible to enter into a villa management structure with a hotel operator to utilize the villa as a hotel accommodation during the absence of its owners (respectively lessees). 
Under a villa agency agreement, the hotel is engaged by each villa owner, as its agent, to manage the villa and let it out to the hotel guests. The hotel also renders general management services and, on behalf of the villa owner, provides to the hotel guests hotel-related services in associated therewith, i.e. reservation services, food and beverages, hotel guest amenities and etc., including maintenance, accounting and administrative services in connection therewith.

An alternative structure is a villa letting agreement between the hotel and the villa owner leasing the villa for occasional use as accommodations in the hotel’s operations. Under the villa letting agreement, the hotel has temporary possession of the villa, collects the rental income from the hotel guests from time to time and pays the villa owner a percentage thereof as occasional rental income. A general property management agreement with all villa owners completes the contractual arrangements.

Whether villa owner and hotel company enter into a principal-agent relationship or a landlord-tenant relationship makes a substantial difference with respect to hotel business license requirements, the activities of the villa owner under the Foreign Business Act, income taxation, VAT and withholding tax requirements. The design of such villa management structure should therefore be carefully planned and accomplished.