The fire killed three people, including a Malaysian tourist, and injured hundreds of others, according to a revised toll given by the provincial governor.
It came on the same day as deadly bomb blasts killed 10 people elsewhere in the region.
"Yes it was a car bomb and it's related to the incident (bombs) in Yala and I believe that it was the work of the same group. The vehicle used was a Honda," national police chief General Priewpan Damapong said.
The fire Saturday at the Lee Gardens Hotel in Hat Yai, the largest city in southern Thailand, was initially thought to have been caused by a gas explosion in the basement.
The death toll was revised downwards after two people believed to be dead were resuscitated, Songkhla provincial governor Grisada Boorach said.
A total of 416 people were injured, mostly suffering from smoke inhalation, and 140 were still in hospital, he said.
The hotel attack came as two bombs in the southern town of Yala killed 10 people and wounded 117.
Colonel Pramote Promin, spokesman for the southern army region, said 29 people were still in hospital.
The blasts hit minutes apart in the centre of Yala around midday as families were out shopping, in the most deadly attack in recent years in the Muslim-majority south of mainly Buddhist Thailand.
A complex insurgency, without clearly stated aims, has plagued Thailand's far south near the border with Malaysia since 2004, claiming thousands of lives, both Buddhist and Muslim, with near-daily bomb or gun attacks.