Who Should Finance Tourism? The Hidden Cash-Flow Problem Between Tour Operators, Travel Agents, DMCs and Hotels
A Global Tourism & Hospitality Strategist’s perspective on payment terms, cash flow and fairness in the B2B tourism value chain
There is a conversation that the tourism industry needs to have more openly.
It is not about hotel rates.
It is not about commissions.
It is not even about competition.
It is about cash flow.
And, more specifically:
Who is actually financing the tourism business?
As someone who has spent decades working across tourism, hospitality, finance, operations and international markets, I believe this question deserves much more attention.
A tour operator or travel agency may collect money from a traveller weeks or months before the traveller arrives.
Yet, in some B2B arrangements, the local DMC or hotel is subsequently asked to provide the service today and wait 15, 30, 45 or even 60 days — sometimes longer — for payment.
That changes the commercial relationship completely.
The local supplier is no longer simply providing a tourism service.
The local supplier is effectively providing short-term financing.
And that financing has a cost.
Tourism is a chain — but cash does not always move along the chain equally
Consider a typical international holiday.
A traveller books a package through a travel agency or tour operator.
The traveller may pay a deposit at the time of booking and settle the balance before departure.
The tour operator then contracts a destination management company.
The DMC arranges hotels, transportation, guides, excursions, restaurants and other services.
The DMC must then deal with local suppliers.
This creates two very different clocks:
The customer payment clock
versus
The supplier payment clock.
When the customer pays early but the supplier is paid much later, somebody has to finance the gap.
The question is:
Why should that financing automatically become the responsibility of the local DMC or hotel?
A simple example
Imagine a 10-day Sri Lankan tour worth US$10,000.
The international tour operator collects the customer’s money before the journey.
The DMC, however, may have to pay:
- Hotel deposits
- Hotel balances
- Transportation providers
- Drivers
- Tourist guides
- Entrance fees
- Restaurants
- Activity providers
- Staff and operational expenses
Suppose the DMC’s suppliers require US$8,000 before or during the trip.
If the international partner pays the DMC 30 days after the guest has departed, the DMC may have financed US$8,000 of the operation.
That is not merely a payment arrangement.
That is working-capital financing.
And working capital is not free.
The tourism industry is growing — but growth also requires financial discipline
Sri Lanka recorded 2,362,521 international tourist arrivals in 2025, an increase of 15.1% over 2024 according to the Sri Lanka Tourism Development Authority.
During January–August 2026, Sri Lanka recorded 1,535,122 arrivals. The corresponding January–August 2025 figure was approximately 1.567 million, meaning the first eight months of 2026 were about 2% lower than the same period of 2025.
The numbers demonstrate something important.
Tourism is not a small industry.
Thousands of businesses participate in the tourism value chain.
Hotels employ people.
Drivers operate vehicles.
Guides depend on daily assignments.
Restaurants purchase food.
Suppliers purchase fuel.
Small businesses provide experiences.
DMCs coordinate the entire ecosystem.
Therefore, when payment terms are extended unnecessarily, the impact does not stop at the DMC.
It moves through the entire tourism economy.
Case Study 1: The Hotel
A hotel receives a booking for 20 rooms.
The hotel must purchase food, beverages, housekeeping supplies, utilities and other operational inputs.
Employees still need to be paid.
Electricity still needs to be paid.
Suppliers still need to be paid.
Yet the hotel may be told:
“We will settle your invoice 30 days after the guest departs.”
The guest has already enjoyed the room.
The hotel has already delivered the service.
The employees have already worked.
But the hotel is still waiting for its money.
This is why hotels need to evaluate credit terms carefully.
Case Study 2: The DMC
A DMC receives a confirmed booking for a 14-day programme.
Before the guest arrives, the DMC may have to commit funds to several suppliers.
The DMC cannot tell the driver:
“Please wait 30 days after the guest goes home.”
The driver has fuel expenses today.
The vehicle has maintenance expenses today.
The guide needs to be paid according to the agreed arrangement.
The hotel may require payment before check-in.
Therefore, the DMC needs liquidity before the guest arrives.
Case Study 3: The Tour Operator
Now consider the other side.
The tour operator has collected the customer’s money.
That creates a working-capital advantage.
There is nothing inherently wrong with that.
In fact, advance collection is common in many travel businesses.
The problem begins when the party that has already collected the money asks another party to finance the delivery of the service for an extended period.
That is where commercial fairness needs to be discussed.
Case Study 4: Airlines
Think about air travel.
Airline distribution has sophisticated settlement systems precisely because the industry understands that money collection and settlement require structured financial controls.
IATA’s Billing and Settlement Plan, for example, provides a framework for financial settlement between participating airlines and accredited travel agents. IATA also operates payment mechanisms such as EASY PAY, where funds are available at the time of ticket issuance.
The lesson is not that every tourism supplier must demand immediate payment.
The lesson is simpler:
Financial risk needs to be deliberately managed.
Case Study 5: Transportation
Imagine booking a coach for a 10-day tour.
The transport company must provide:
- Vehicle
- Driver
- Fuel
- Maintenance
- Insurance
- Staff time
The vehicle cannot operate on “Net 30” fuel.
The driver cannot fill the tank with a promise that payment will arrive after the passenger returns home.
The transportation provider therefore carries real operating costs throughout the journey.
The DMC carries the same problem.
Case Study 6: The Small Local Supplier
This is perhaps the most important case.
Imagine a small local tourism business providing an excursion.
It may have five employees.
It may operate one vehicle.
It may have limited access to bank financing.
It may depend on tourism revenue to pay its monthly bills.
A large international company may be able to absorb a delayed payment.
A small local supplier may not.
Therefore, long payment cycles can have a disproportionate impact on smaller tourism enterprises.
The smaller the supplier, the more important predictable cash flow can become.
Case Study 7: The DMC caught between two worlds
This is where the problem becomes particularly interesting.
The DMC sits in the middle.
The international partner expects competitive pricing.
The hotel expects payment.
The driver expects payment.
The guide expects payment.
The guest expects excellent service.
The DMC is expected to coordinate everything.
And then comes the question:
Who finances the operation until the international partner pays?
If the answer is always “the DMC”, then the DMC is carrying a significant portion of the financial risk.
That may be acceptable where the DMC has deliberately agreed to credit terms.
But it should not automatically be treated as the default business model.
“But this is how the tourism industry works.”
I hear this argument frequently.
Perhaps some companies have operated this way for years.
Perhaps certain established relationships genuinely justify credit.
Perhaps large suppliers and financially strong partners negotiate different terms.
All of that is possible.
But there is an important distinction between:
A negotiated credit facility
and
an expectation that a supplier will finance your business.
They are not the same thing.
Credit should be based on commercial agreement, financial capacity, risk assessment and mutual benefit.
It should not simply become an industry habit.
The hidden cost of “30 days after departure”
Let’s examine a simple scenario.
A DMC has US$50,000 in supplier obligations connected to upcoming tours.
If the DMC has to finance that amount for 30 days, the business has effectively tied up US$50,000 of working capital.
If bookings increase, the requirement increases.
US$50,000 becomes US$100,000.
US$100,000 becomes US$250,000.
Growth can therefore create a paradox:
The more successful the DMC becomes, the more working capital it may need to finance other businesses.
That is not necessarily sustainable.
This is not an argument against credit
Let me be very clear.
I am not against credit.
Credit can be an extremely useful commercial tool.
Established companies can negotiate:
- Net 7
- Net 15
- Net 30
- Deposits
- Milestone payments
- Credit limits
- Bank guarantees
- Escrow arrangements
- Other agreed settlement structures
A B2B travel payment guide published in 2026 similarly identifies prepaid arrangements, deposits, balances before travel and credit terms such as Net 7, Net 15 and Net 30 as different models used in the industry.
The real issue is who carries the risk.
A more balanced model for DMC–TO cooperation
I believe the tourism industry should increasingly consider payment structures such as:
1. Advance payment
Payment before the guest arrives.
This is particularly suitable for new business relationships.
2. Deposit + balance
For example:
30–50% at confirmation
and
remaining balance before arrival.
The exact percentage should be negotiated according to the booking and supplier requirements.
3. Controlled credit
Credit may be provided to established partners after appropriate commercial due diligence.
There should be:
- Credit limits
- Agreed payment dates
- Clear consequences for late payment
- Defined booking conditions
4. Credit backed by financial security
For larger volumes, parties could consider appropriate financial instruments or guarantees.
5. Different terms for different partners
A new customer and a long-standing customer do not necessarily need identical terms.
That is normal commercial risk management.
The principle I follow
My position is straightforward:
If the customer has already paid, the supplier should not automatically be expected to finance the entire tourism chain.
Every business has expenses.
Every business has employees.
Every business has suppliers.
Every business has working capital requirements.
A DMC is no different.
We have to pay hotels.
We have to pay transportation companies.
We have to pay drivers.
We have to pay guides.
We have to pay other service providers.
We cannot pay our suppliers with “please wait until our international partner pays us.”
That is not a sustainable business model.
Tourism partnerships should be based on mutual respect
International tourism works because different businesses trust one another.
The tour operator needs the DMC.
The DMC needs the hotel.
The hotel needs its employees and suppliers.
The guest needs all of them.
Therefore, the relationship should not be:
“You provide the service today, and we will decide when to pay you.”
It should be:
“Let us agree commercially acceptable payment terms that protect both sides.”
That is a much healthier approach.
My position as a DMC professional
At International Hospitality Ventures, our objective is not simply to sell Sri Lanka.
We want to build long-term international tourism partnerships.
That means transparency.
That means professional communication.
That means reliable operations.
And it also means responsible financial management.
We are happy to discuss business.
We are happy to negotiate.
We are happy to build long-term relationships.
But we also need to protect the financial sustainability of our local tourism ecosystem.
Therefore, for new B2B relationships, our preference is clear:
Payment should be made according to an agreed arrangement that allows us to meet our hotel, transportation, guide and other supplier commitments without unnecessarily financing the buyer.
This is not hostility.
This is not a refusal to cooperate.
It is responsible tourism business management.
One final question for the industry
If a traveller pays you before travelling…
And you pay the airline according to its settlement system…
And you pay other suppliers according to their agreed terms…
Why should the local DMC automatically become the bank?
That is the question I believe our industry should discuss.
Not emotionally.
Not personally.
But commercially.
Because sustainable tourism is not only about attracting more visitors.
It is also about creating a tourism value chain in which the businesses delivering the experience can remain financially sustainable.
Sri Lanka’s tourism future depends on hotels, DMCs, guides, drivers, restaurants, attractions, communities and international partners working together.
And that partnership should work both ways.
Tourism should create value for everyone in the chain — not working-capital pressure for only one side.
My professional principle
I would rather build 10 financially healthy long-term partnerships than 100 partnerships where my company is expected to finance somebody else’s business.
That is not simply a payment policy.
It is a business philosophy.
About the Author
Dr. Dharshana Weerakoon, DBA (USA) is a Global Tourism & Hospitality Strategist, Entrepreneur, Educator and hospitality professional with more than three decades of experience spanning tourism, hospitality, finance, technology, academia and international business across multiple markets.
He is Chairman of Global Cooperation Private Limited and Managing Director of International Hospitality Ventures Private Limited, with a professional focus on destination management, hospitality strategy, international tourism partnerships and emerging tourism models.
Disclaimer
This article has been authored and published in good faith by Dr. Dharshana Weerakoon, DBA (USA), drawing on publicly available tourism and economic information, professional experience across international tourism and hospitality markets, and ongoing industry observation.
The article is intended for educational, professional, journalistic and public-awareness purposes and is designed to stimulate constructive discussion about tourism business models, payment practices and financial sustainability.
The examples and case studies are illustrative and should not be interpreted as allegations concerning any particular company, individual, hotel, tour operator, travel agency or DMC. Payment practices vary between markets, contracts and business relationships.
The views expressed are the author’s personal professional and analytical views and do not constitute legal, financial, accounting or investment advice. Readers should obtain appropriate professional advice before making commercial decisions.
The article is intended to respect applicable Sri Lankan laws, contractual principles, intellectual-property requirements, privacy standards, non-discrimination principles and relevant ethical standards.
© Dr. Dharshana Weerakoon, DBA (USA). All rights reserved.
Further Reading: https://www.linkedin.com/newsletters/outside-of-education-7046073343568977920/
Further Reading: https://dharshanaweerakoon.com/sri-lanka-financial-system/
