Thai Hotels Association urges Finance Ministry to review land tax law amid downturn in Chinese tourism

Thienprasit Chaiyapatranun, President of the Thai Hotels Association (THA), revealed that the association plans to propose that the Ministry of Finance review and revise the Land and Building Tax Act to better reflect Thailand’s real business conditions. The THA suggests combining features of the former house and land tax system, which was based on business income, with the current land tax structure.

Under the old system, hotel operators could request temporary tax exemptions during renovation periods when no revenue was generated. The current land tax, however, offers no such flexibility, placing a heavy burden on operators, particularly those facing financial difficulties.

Thienprasit pointed out that although long-haul markets from Europe and the US have rebounded strongly — surpassing pre-COVID-19 levels — arrivals from China, Thailand’s largest source market, remain sluggish. In 2025, only 5 million Chinese visitors are expected, down from 7 million in 2024 and far below the 11 million recorded in 2019.

This decline has directly affected overall tourism numbers, with hotels dependent on Chinese group tours reporting up to a 50% drop in occupancy rates, particularly in key destinations such as Bangkok and Phuket. Factors include safety concerns and a shift in Chinese traveller behaviour from organised tours to Free Independent Travelers (FIT).

Small and mid-sized hotels catering to tour groups now face liquidity problems, as revenues shrink but fixed costs — such as salaries, water, and electricity — remain unchanged.

As a result, many hotels, particularly two- and three-star properties, are struggling with two major issues:

1. Persistent tax burdens despite losses: Businesses with little or no income must still pay land tax annually, and property valuations by the Treasury Department rise with each new appraisal cycle, while hotel revenues do not.

2. Inappropriate valuation base for developed properties: The Treasury Department’s appraised land value, typically used by banks for loan collateral and for calculating transfer fees and taxes, is unsuitable for developed properties such as hotels. It may be appropriate for undeveloped land but not for operating businesses that cannot raise revenue in line with rising valuations.

The THA will urge the Finance Ministry to adopt a hybrid tax model that accounts for business income and operational conditions, ensuring fairness and sustainability for hotel operators nationwide.

Thienprasit added that the government’s latest tourism stimulus measures have provided some relief to business operators, but are not as effective or well-targeted as they could be. He explained that some of the measures do not reach or genuinely benefit small hotel operators, who are among the hardest hit in the current market.

He pointed out that the “Tiew Dee Mee Khuen” scheme, which offers personal income tax deductions for travel expenses, has been somewhat helpful, particularly in stimulating tourism among middle- and high-income earners who are in taxable income brackets and can utilise the deduction.

“The Thai Hotels Association is now promoting this programme and conducting training sessions for members to join the e-invoice system to qualify for the scheme. However, many small operators still lack understanding of how to implement it,” he said.

As for the tax incentive scheme for hotel renovations, Thienprasit noted that it mostly benefits large five-star hotels, which are generally run by major international chains that already have the capital and regular renovation plans in place.

In contrast, Thai-owned and smaller hotels — particularly three-star properties and below — are the ones in urgent need of renovation. Many of these older establishments are still struggling with losses following the COVID-19 pandemic. Since they are not profitable, they cannot fully benefit from tax deduction incentives.

“If the goal is to maintain hotels in good condition and uphold Thailand’s tourism image, the government should consider a more practical measure, such as introducing a soft loan scheme designed specifically for hotel renovations under defined conditions. Tax incentives won’t help if businesses lack working capital to renovate,” he said.

Regarding the measure to accelerate government seminar and conference spending, Thienprasit described it as a good idea in principle, but said it was poorly timed for the high tourist season.

He explained that government seminar budgets have not increased for over a decade, and most hotels prefer regular tourists during this period because they pay higher rates. As a result, the effort to expedite government spending between October 2025 and January 2026 is unlikely to have much impact, since most hotels would rather cater to leisure travellers who offer better revenue margins.