Feb 02, 2018

Chinese travel on credit badly affects Sri Lanka travel firms

The settlement issue of millions of dollars in credit given by local travel companies to tourist agents in China to arrange tour packages for Chinese travelers visiting Sri Lanka has hit the industry in a sluggish economy

“Few small timers have closed up operation and several medium and large scale operators are faced with delayed payments up to 180 days or non-payment up to large amounts of US dollars at present”, Sri Lanka Association of Inbound Tour Operators (SLAITO) said. 

Around 40 to 50 Sri Lankan travel companies are engaged in bringing down Chinese travelers at present,

Many Chinese travel agents have defaulted in settling credit given by a number of travel companies in several instances.

One such local travel company has given credit amounting to US$ 2 million to a Chinese travel agent and is now in serious financial trouble, he said adding that the accumulated credit of some of these local tour operators under this set up would be more than $10 million easily.

“Working with Chinese agents has a credit risk at large. Ideal scenario is to recover the full payment in advance or 60-80 percent prior to the tour”, SLAITO observed.

If credit is extended, it should be given after a thorough back ground check, he pointed out adding that generally majority of Chinese agents will request credit for 60-90 days.

However when credit is extended a very close tab on payments is needed on the business handled and future business as well, he suggested.

Each company will have to carry out their own back ground checks on Chinese agents and extend credit accordingly, SLAITO emphasised.

Businesses are run individually and each company has to check credit worthiness and manage the incoming business and payments receivables with a very close control of outstanding payments, SLAITO said noting that it should not be allowed to go beyond the extended credit limit strictly.

Most of the Sri Lankan companies have used different methods to recover debt payments by complaining to the Sri Lanka Embassy in Beijing and with the help of, third party payment recovery units operating in China.

Over 268,000 Chinese tourists visited Sri Lanka last year with China emerging as the second largest market, Tourism Ministry showed. In December 2017 alone, over 19,000 Chinese tourists arrived in Sri Lanka.

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