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The Phuket Provincial Land Office has issued a formal warning to owners, developers and managers of condominiums that renting out their properties on a daily basis is a breach of the Hotel Act that may incur a fine or even jail time.
In December, Dr Kritsada led a delegation of tourism and hospitality leaders in filing a petition calling for the government to take action against an estimated 92,000 illegal hotel rooms in Phuket.
“At least 70 per cent of hotel rooms offered in Phuket are illegal. To make them all legal can take time and some of them simply cannot be registered as a hotel simply because structurally they are not hotels, so they must operate according to their registration,” he said this week.
“If Phuket has only legal hotel rooms available to tourists, rental prices will compete better, maybe even on par with international rates as charged by hotels in other countries. Look at places like Singapore or Bali, their rates and reservations for hotels are increasing because their hotel rooms are legal – they don’t have to compete with illegal hotel rooms rates.”
Bhuritt Maswongssa, Bhuritt Maswongssa, President of the Phuket chapter of the Tourism Council of Thailand (TCT), strongly agreed, and even warned that a tourist-accommodation price war could have a dire effect on Phuket’s tourism industry on the whole.
“If officials who have the power to stop this from happening neglect their duty and allow illegal hotels to exist, then there will be a rental rates issue among the hotel businesses. Competition over rental rates will create a domino effect. Hotels have to cut costs, and this could easily result job losses, a fall in the quality of service and trust in Phuket hotel standards. This would be a disaster for our tourism industry,” he said.
“Phuket has 2,090 hotels offering about 120,000 rooms. Our supply already exceeds demand, putting pressure on hotel prices. If this continues, we are already heading for a disaster,” he added.
Phuket property guru Bill Barnett, Managing Director of hospitality consultancy C9 Hotelworks, also condemned the practice of condos being rented out at daily rates.
“The current situation of real estate developers offering guaranteed returns in the absence of obtaining hotel licenses is a blatant abuse of Thailand’s Hotel Act. Government scrutiny in this sector is urgently needed as it undermines trading of legal hospitality operations and goes further into the issues of tax and tourist safety.”
However, while noting that the key issue driving government intervention is the current mandate to increase tax revenues, he added, “That said, the Hotel Act needs to be updated to allow condominiums that do wish to obtain hotel license and villa estates or properties a clearer pathway,as there are a many who are willing to obtain the necessary documentation.”
Phuket Governor Chamroen Tipayapongtada, when announcing earlier this year that “illegal hotels” would be coming under scrutiny, said, “There are so many businesses that provide rooms and board in Phuket operating illegally in contravention of the Hotel Act 2004.
“Businesses such as condominiums, apartments, flats, mansions, guesthouses, homes for rent, rooms for rent, commercial buildings – most of which have been altered or developed into accommodation and rented on a daily basis – are considered a hotel business and hence as illegal hotels.
“Illegal hotels are damaging legally registered hotel operators who have their hotel license. We are also concerned how these affect tourists’ safety, because we don’t have enough security to cover all these places.”
Gov Chamroen added, “We understand that some of these operators are unaware that their business operation contravenes the Hotel Act and they cannot register their business as hotels because they are not hotels
“A hotel business involves many laws, so solving this issue is not easy. The Ministry of Interior is working on this issue. I know the ministry is considering a proposal to allow other types of building to operate as hotel, which is now being considered by their policy committee.
“While we are waiting for the ministry to decide on this, we have to regulate hotel businesses in Phuket by allowing only the legal hotels to operate, and places that did not have a permit to operate as a hotel will have to wait until they are legally registered.
“People operating such illegal hotel businesses with the intention avoiding registering their business will be punished according to the law,” he said.