More than 9,500 small hotels, guest houses and other accommodation businesses across Phuket are believed to remain unable to secure hotel licenses, with local small owners complaining that government bureaucracy, conflicting regulations and years of incomplete reforms have created a licensing system that many established operators cannot realistically navigate.
Image Credit: Phuket Hotel News
The growing problem has serious implications for Phuket’s tourism industry, government revenue and accommodation standards, and this Phuket Hotel News report examines why thousands of small operators remain outside the formal licensing system despite years of inspections, registration campaigns and regulatory changes intended to bring them into legality.
Thousands Remain Outside the Legal System
Phuket is estimated to have approximately 10,000 to 10,800 accommodation businesses, ranging from small resorts to boutique properties, family-run guest houses and small independent operators. However, only a fraction are understood to possess official hotel licenses.
Local small owners complain that the problem is frequently portrayed as simply one of illegal hotels. They argue that many operators genuinely want to become properly licensed but face regulations that make approval extremely difficult or, for some existing properties, practically impossible.
Years of inspections and enforcement campaigns have consequently failed to resolve the underlying problem. Industry estimates suggest that, at the current pace of inspections, it could theoretically take around 80 years to inspect every accommodation business across Phuket.
Operators argue that this demonstrates why Phuket cannot simply enforce its way out of what is fundamentally a structural regulatory problem.
Old Regulations Clash with Modern Phuket
Small hotels and family-operated guest houses have been part of Phuket’s tourism industry for decades, with many established during the island’s rapid development as an international destination during the 1970s and 1990s.
The regulatory environment changed significantly following the Hotel Act B.E. 2547 in 2004.
Licensing requirements subsequently created difficulties for smaller businesses operating from older buildings constructed under previous rules.
Requirements covering open space, staircase dimensions, building layouts and fire protection have been among the major obstacles.
Local small owners complain that many standards were developed with large commercial hotels in mind but were subsequently applied to much smaller accommodation businesses.
A requirement that may be reasonable for a newly constructed resort accommodating hundreds of guests can become extremely difficult when retrospectively applied to a small guest house operating from an older shophouse or converted residential property.
Owners cannot simply widen staircases, significantly restructure buildings or create additional open space around properties constructed decades earlier.
Years of Reform Fail to Break Deadlock
Successive governments have attempted to resolve the licensing problem through regulatory amendments introduced in 2016, 2021 and 2023.
Some changes were intended to allow older buildings to comply according to standards that existed when they were originally constructed. Others removed particularly difficult requirements, including certain open-space provisions. On paper, the reforms appeared capable of opening a pathway towards legality for thousands of businesses.
In practice, operators say the situation has changed far less dramatically. Local environmental requirements, overlapping building regulations and different interpretations among officials and government agencies continue to prevent applications from progressing.
Local small owners complain that while regulations have changed on paper, their practical experience of trying to obtain a license remains frustratingly similar.
Government registration seminars and licensing clinics have encouraged operators to submit applications, but businesses argue that encouraging applications achieves little when fundamental regulatory obstacles remain unresolved.
Fire Safety Rules Highlight Confusion
Fire-safety regulations are frequently cited as an example of how seemingly straightforward requirements can create licensing difficulties.
Rules can require doors capable of resisting fire for at least 30 minutes. However, disagreements can arise over whether properties require dedicated emergency-exit doors equipped with push bars and without conventional locking mechanisms.
Hotel guest-room doors naturally require locks for guest security and privacy. When different authorities interpret technical requirements differently, operators can be forced to wait months for clarification from central government agencies.
During that period, applications can remain stalled.
Owners may spend significant sums upgrading buildings, installing safety equipment and preparing documentation without knowing whether those investments will ultimately result in a license.
For smaller businesses operating with limited financial resources, repeated alterations or changing interpretations can make the licensing process particularly burdensome.
Legalization Could Deliver Major Tax Boost
Solving the licensing crisis could provide substantial financial benefits for Phuket.
One proposal would transfer responsibility for smaller accommodation businesses to local government organizations rather than processing every category through essentially the same national administrative structure.
Under proposals discussed within the tourism sector, properties containing between one and eight rooms could fall under local administrative authorities. Businesses with nine to 49 rooms could be handled at provincial level, while larger hotels would remain under the national licensing structure.
Supporters believe this would allow regulations and licensing procedures to better reflect the size and nature of individual businesses.
The financial implications could be significant.
Estimates indicate that bringing another 2,000 to 3,000 accommodation businesses into Phuket’s formal system could potentially increase tourism-related tax revenue from approximately 380 million baht annually to around 1.2 billion baht.
Rather than simply penalizing businesses unable to secure licenses, reform could therefore potentially deliver hundreds of millions of baht in additional public revenue.
Digital Licensing Could Cut Bureaucracy
Another proposal is the introduction of a fully online hotel licensing system.
A digital platform could immediately identify missing documents, allow applicants to track applications and provide a transparent record showing where delays are occurring.
There have also been calls for authorities to reach a licensing decision within 66 days.
Supporters argue that approval should be granted once applicants have demonstrably satisfied all published legal and technical requirements.
Such a system could reduce discretionary decision-making and provide operators with a clearly defined pathway towards legality.
For investors, certainty is crucial. Knowing exactly what requirements must be satisfied — and knowing that compliance will result in approval — could significantly improve confidence in Phuket’s accommodation industry.
New Hotel Act Could Transform the Industry
There are also growing calls for Thailand’s Hotel Act to be replaced or comprehensively modernized.
Critics argue that existing legislation reflects a traditional tourism industry centered around conventional hotel buildings, while modern travelers increasingly use treehouses, tents, floating accommodation, campervans and other alternative properties.
One proposed framework would divide tourist accommodation into three categories.
Properties containing up to eight rooms could be classified as not being hotels. Businesses containing nine to 40 rooms could become a separate accommodation-business category, while properties with 41 rooms or more would be classified as hotels.
Different safety, environmental and operating standards could then apply according to the scale and characteristics of each category.
Such a structure could prevent small family-run guest houses from facing the same regulatory expectations as major resorts.
Several legislative proposals have already emerged from political and government bodies, with expectations that different drafts could eventually be consolidated into a single bill.
Temporary Relief Could Help 1,200 Operators
While comprehensive reform could take time, more immediate measures are also being considered.
An extension or replacement of existing ministerial regulations could reportedly allow approximately 1,200 additional small accommodation businesses to enter the legal system.
However, concerns remain that delays could create another regulatory gap if temporary measures expire before replacement rules are introduced.
There have consequently been calls for temporary regulations to remain effective for several years, giving lawmakers enough time to complete a comprehensive replacement for the existing Hotel Act.
The objective is to prevent Phuket’s accommodation industry from repeatedly moving between temporary regulations, expiration dates and renewed uncertainty.
Phuket Needs a Permanent Solution
Phuket’s licensing crisis now extends far beyond paperwork. It raises a fundamental question about whether Thailand’s accommodation laws have kept pace with the development of one of Southeast Asia’s most important tourism destinations.
Thousands of small hotels and guest houses contribute to Phuket’s economy by providing accommodation, creating employment and supporting local suppliers. Keeping large numbers of these businesses outside the formal licensing system provides little long-term benefit to operators, visitors or authorities.
A workable regulatory framework could increase government revenue, improve fire and building safety, strengthen tourism statistics and provide authorities with greater oversight of the accommodation market.
Formalization could also give smaller operators greater confidence to invest in renovations, improve facilities and employ additional workers without constantly facing uncertainty over their legal status.
After years of regulatory amendments, registration drives and enforcement campaigns, local small owners complain that Phuket urgently needs a licensing system designed around the realities of its modern tourism economy.
If effective reforms are finally delivered, thousands of accommodation businesses could potentially enter the formal system, strengthening safety standards, increasing tax revenue and creating a more transparent industry. If bureaucracy continues to delay meaningful change, however, Phuket risks carrying the same licensing crisis into another decade, leaving thousands of small businesses trapped outside a legal framework they say they have repeatedly attempted to join.
