Tourism Industry Analysis and Strategies

This assignment delves into the complexities of the tourism industry by examining various factors that shape its development and success. Students are tasked with analyzing case studies related to destination competitiveness, service performance, international travel trends, and the impact of political instability on tourism. The assignment requires critical thinking, research skills, and an understanding of key concepts such as sustainable tourism, public-private collaboration, and tourism policy implementation.

FINANCE AND FUNDING IN
TRAVEL ADN TOURISM
SECTOR

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Examine the costs and volume in financial management of travel and tourism organisation
.....................................................................................................................................................1
1.2 Pricing method in the travel and tourism sector....................................................................2
1.3 Factors influencing profit for travel and tourism business....................................................3
TASK 2............................................................................................................................................5
2.1 Management accounting information that could be used in travel and tourism business.....5
2.2 Use of investment appraisal management accounting information as decision making tool
.....................................................................................................................................................6
TASK 3............................................................................................................................................7
3.1 Interpret travel and tourism financial accounts.....................................................................7
TASK 4............................................................................................................................................8
4.1 Source and distribution of funding for the development of capital projects related with
tourism.........................................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Finance and funding indicates towards analysing financial requirement and arrangement
of financial resources with in the organisation. This report is prepared to elaborate importance of
finance and funding with in travel and tourism sector (Chen, Chen and Lee, 2011). Funding and
finance activities are performed by organisations subject to enhance credibility of clients and
customer at large level. Complexity between management and operations of travel and tourism
sector are defined with cost volume and profit aspects. Pricing methods, profit influencing
factors with in travel and tourism sector illustrated. Management accounting information and
investment appraisal management techniques also defined in this report. ATC company is opted
for analysing concept of finance and funding. Interpretation of financial data of travel and
tourism industry and source of distribution of funding for the development of capital projects
also defined in this context.
TASK 1
1.1 Examine the costs and volume in financial management of travel and tourism organisation
Travel and tourism industries plays vital role subject to enhance growth and development
of country's economy. It is important for organisation to develop and manage operation by
considering economical factors for desired success and results. Sustainability and profitability
depends upon effective and appropriate ration of financial resources with in the organisation.
Profit is the main factor which encourage departmental efforts to grow further and achieve
targeted goals and objecctoves.
Cost Volume Profit analysis
this is a concept used to analyse managerial accounting technique for effective, sale
volume and product cost. Perfect combination of cost, profitability and volume ratio helps to
manage the order of financial requirement with in the organisation. Cost is the major part which
is the base to maintain profitability level and analysing the amount of volume (Yap and Saha,
2013). There are three major assumptions are taken in this subject which are as follows;
 Cost can be categorised as fixed and variable
 Sales price of per unit, overall fixed cost and variable cost
 How much sales units are produced and sold during the year
A profit equation is used to analyse the profitability which is
Px = Vx + FC + Profit
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Where P = Price per unit
V = Variable cost per unit
x = total number of units produced and sold
FC = Fixed cost for the year
there are following concepts are considered under CVP analysis such as:
 Contribution margin (CM): Difference between sales and variable cost is known as
contribution. It simply indicates towards variable income which always remain exceed
from variable cost (Lien, Ghosh and Yamarik, 2014). This is also considered as initial
stage of evaluating contribution. It its considered by following equation such as :
Contribution Margin (CM) = Sales (S) – Variable cost (VC)
 Unit contribution margin (Unit CM): this is an analysis which defined that how much
contribution is earned on particular unit. It is calculated as follows:
Contribution per unit = Total contribution / sales units
or
Contribution per unit = Sales price – Variable cost per unit
 Contribution margin ratio (CM ratio): this is the ration calculated by dividing margin
by total sales or unit by CM by price per unit. It is calculated as follows:
CM ratio = (Contribution / Sales)*100
1.2 Pricing method in the travel and tourism sector
Pricing methods are used in travel and tourism sector is mainly centralised around
determine the standards and targets for desired outcomes. Pricing strategies and plans contributes
valuable contribution subject to attain wanted results and outcomes. Strong mix of marketing
strategy and financial analysis is required to formulate and execute developing pricing for
tourism sector. Customer interest, clear vision, people and supportive components are used to
determine effective price for products and services (Saha and Yap, 2014).
Following components and elements are required to consider while making effective
pricing strategy.
 Uniqueness of the business and flexibility subject to products and services for deciding
price.
 Value added services which are provided inclusive of the experience.
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 Customer or client attraction techniques and what positioning within the market
organisation wants to establish.
 Analysing and determining the operating cost such as (Fixed and variable cost), break
even points and minimum price to maintain optimum level of profitability.
 Setting the prices based upon market, like competitor, similar products, services and
charge within the market.
 Measure own financial position and flexibility subject to debts level, cash flow statement.
Various pricing techniques are used subject to determining price, which are as follows;
Competition oriented pricing: this pricing basically used to determine the cost and
profitability by considering premium pricing factors, discounted pricing and parity pricing.
Penetration of the pricing policies with comparison of competitors. This techniques is competitor
oriented which not only helps to analyse profitability and deciding price in effective manner.
Cost based pricing: Cost based pricing is basically centralised around over all cost of
operations and administration. This pricing method is based around various aspects such as full
cost pricing method which contains both fixed and variable elements, direct cost pricing subject
to variable cost or markup price (Alleman and et. al., 2011).
Seasonal pricing: This method is a combination of low, high and shoulder seasons in
which tourism business can grow. Various stages remain bifurcated subject to sales records
according to time period of the year. Summers, winter and spring season. Destinations which are
situated at warm places attracts visitors from cold countries and countries which have cold
atmosphere attracts visitors from warm countries.
Demand based pricing: this is one of the simple pricing method which is used by
organisation on the basis of popularity of destination. This is the process of deciding price based
upon demand in the present market. Low demand factors are considered to reducer the credibilty
of organisation.
Skimming pricing: Skimming is a method in which price and charges are applied at
initial stage. Overall package prices is determined at initial stage after considering all the
relevant aspects and factors.
1.3 Factors influencing profit for travel and tourism business
Profit and cost are main aspects which are considered essential in respect of attaining
desired success and growth of organisation. Marketing is the only method which helps to
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overcome the organisation from these factors. It encourage visitors and clients towards popular
and famous destinations. Climate and geographical appearance of countries remain different
from each other. A country which is full of resources an good from natural and geographical
aspects attracts more visitors and clients. This is considered positive and favourable signs subject
to growth of travel and tourism sector of country. It directly improve the structure of economy
and enhance the growth graph of economy (Ferrer and Medhekar, 2012). Various factors which
affect travel and tourism sectors are defined as follows:
Natural disasters: Tsunamis, earthquakes and flood are the types of natural disasters. It
has huge negative impact upon travel and tourism industry of a country. It is very difficult for an
both country and travel sector to attracts visitors and clients in unbalanced formation and rotation
of natural disasters. Country not only has to bear loss of visitors and customers but also has to
beat loss of property, assets and infrastructures.
Weather conditions: this factors is considered essential subject to getting customer
attraction and attention for better growth and development of travel and tourism sector. Whether
conditions plays vital role subject to grow and develop travel and tourism structure of country.
Extreme weather conditions also prevents customer and visitors' attractions towards tourist
destinations.
Disease outbreaks or plagues: Healthy and adequate atmosphere is also helps country in
order to increase the number of customers and visitors. Logical aspects and reasons allows
human nature to think about travelling and adventuring. Country which are good and prominent
as per health and safety features remain at priority in the human mind. No visitor would like to
visit a destination inadequate in respect of health and safety aspects.
Countries at war: this factor highly damage the reputation and growth of travel and
tourist sector of war countries. No visitors would like to go at those countries a war torn country.
It is mostly covered by the media which impact the image of travel and tourist destination in very
dramatical manner. At the time of war visitors and tourists have to bear lots of problems. They
have to pass through various procedures and rules. To avoid consequences tourists avoid a war
torn countries.
Economy: economical structure of country is known as boosting factor in terms of
increasing visitors and customers number with in travel and tourism sector. Saving monetary
resources and utilising resources in effective manner is also one of the essential aspect which is
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covered in economical factor. Most of the visitors pay attention towards spending upon living
and food products rather than shopping.
Seasons: various kind of holidays and the changing destinations attract visitors and
tourists. This factor increase tourist choice and interest as per seasonal duration. Most of the
tourist plan their holidays and vacations according to suitability. For example visitors who
belongs from winter regions prefer to visit summer destinations and tourists who belongs from
warm regions and countries prefer to visit winter destinations (Witt, Brooke and Buckley, 2013).
TASK 2
2.1 Management accounting information that could be used in travel and tourism business
Management information assist managers and accountants to understand and elaborate
the dimensions of strategic management. Daily transactions and events are records in order to
enable effectiveness off decision making. It also compares between past and future accounts of
company. Benefits are evaluated in monetary terms. Following management informations remain
essential for better growth of travel and tourism sector:
Budget reports: these reports remain associated with the events and transaction of
previous period and transactions. These reports are prepared with the help of budgetary process.
These are considered as a plans made for better utilisation of resources in near future. Results are
prepared on the basis of budgeted income and expenditure.
Disclosure of Investment plans: this is a disclosure which defines the investment
decisions which remain related to utilising and implying resources in effective manner to gain
optimum returns. Investment options for the best benefits are taken in consideration to access the
tasks. With the help off investment decisions information organisation be able to adopt best
growth strategy. Investment reports provides information and data related to utilisation of capital
resources.
Financial projections reports: Financial projections helps to analyse possible sources of
arrangement of financial resources and managing them accordingly. These information basically
used to project cash requirement for upcoming events and fulfil expected revenues to expected
cost. Future decisions and strategies remain based upon accurate measures and assumptions
(Yang and Wong, 2012).
Financial statements: financial statements of organisation produce formation related to
financial performance and profitability position of organisation. Information which are related to
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financial performance are provided by ratio analysis and capital adequacy of organisation. These
information remain beneficial for stakeholders, internal parties, banks and financial institutions.
Management information system: this is a system contains analytical and logarithm
based software. A software generated information is used to analyse financial decisions and
decision making process. Basically this system is used in large organisations subject to resolve
complex business situations and problems. A database system is maintained by organisation to
record transactions and events and software generated information is produced to make plans and
strategies.
2.2 Use of investment appraisal management accounting information as decision making tool
Investment appraisal techniques are used to find out best capital and investment option
for better growth and development. Money is spent upon business decisions and managing
functions for better and optimistic manner. Organisations utilise capital sources in investments in
order to get desired return and outcomes (Investment appraisal techniques, 2017). Various
investment appraisal techniques are used to analyse the durability and effectiveness of
investment option;
Accounting rate of return (ARR): this method is used to analyse and compare profits to
make form an investment to the amount which need to invest. It is basically calculated on the
basis of average profitability in respect of investment projects, profitability of capital investment.
This is also considered as return on investment.
Payback Period: This is calculated in respect of expressed in years. Cash inflows from
capital investment projects to equal the cash outflows. This method provides information and
details subject to recovery of original capital invested in a project. It remain equal to the project's
cash flow. It clarify the recovery time of invested amount by accumulation of the cash inflows.
Profitability Index (PI): it helps to evaluate project based calculation of value per unit
of investment. Value investment ratio an profit investment ration remain based upon effective
and optimum measurement of capital investment. Technique is considered as ratio of amount of
money utilised to profit or pay off the projects.
Net Present Value method: this is one of the common approach which is used by
organisations subject to analyse future credibility of resources in terms of goods and services. To
enhance wealth, inflows must exceed the present value of all anticipated cash outflows. This is
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calculated by discounting all cash outflows and inflows attributes to a capital investment project
by a chosen percentage.
Internal Rate of Return: this method is used to analyse discount rate used in capital
appraisal which is carried out the cost of a project and upcoming cash inflows into equality. This
is also considered as the rate at which net present value become zero.
For example :
Particular Project Discounting factor Discounted cash inflow
Year Cash Flow 12.00% Present Value
0 -190000 1 -190000
1 50000 0.893 44645
2 64000 0.797 51020.8
3 58000 0.712 41284.4
4 70000 0.636 44485
Total P.V 181435.2
Initial
investment
of year -190000
NPV -8564.8
IRR 9.94%
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Restaurant has an expansion plan worth £190000 in setting up new restaurant chain. As
per the above analysis it is seen that the net present value of the project was calculated as -8564.8
and the internal rate of return is calculated as 9.94%
TASK 3
3.1 Interpret travel and tourism financial accounts
There is an financial position statement of Dalata group plc given below through which financial
position of organisation is analysed.
Profitability ratio: To calculate profitability of organisation gross profit and net profit
ratio is analysed. These ratios are illustrated as under:
Gross profit margin = (Gross profit / Sales)*100 = (220 / 348)*100 =63.21%
Net profit margin = (Net profit / sales)*100 = (68 / 348)*100 = 19.54%
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Liquidity ratio: this ratio defined the liquidity position of organisation in order to
repayment of short term debts and liabilities with liquid assets (Peric, Mujacevic and Simunic,
2011). Current ratio and liquid ratios are evaluated in respect of analyse liquidity position of
organisation.
Current ratio: (Current assets / Current liabilities) = (114.8 / 58.6) = 1.96
Liquid ratio: (Liquid assets / current liabilities) = (88.9 / 58.6) = 1.52
Interpretation
As per analysation of financial ratios it is seen that liquid position of Dalata Group is in
positive structure. As per above analysis of ratios it is seen that the Gross profit margin is
calculated as 63.21% and net profit margin is calculated as 19.54%. Dalata group took bank
loans subject to boost the operations and management. Dalata also invested in leasehold property
which was recorded as 24%. as per liquidity ratio it is analysed that the current ratio is evaluated
as 1.96 and the liquid ratio is calculated as 1.52.
TASK 4
4.1 Source and distribution of funding for the development of capital projects related with
tourism
Sources of funding is based upon availability of financial resources and allocation at
required sections (Pike, 2012). Financial resources are managed subject to maximise profitability
and tourist interest and visitor's attraction. Cultural aspects, media support, national lottery
commission and government roles assist travel and tourism structure of country for better
development. Capital projects are proposed for better advancements and improving travel and
tourism sector subject to emerge structure of travel sector in country.
There are source of funds are available for the ATC group. Various type of source of
funds are defined subject to generate financial help form various resources such as;
Public funds
 Equity: this is one of the source off generating funds from public. Funding is tried to
generate by offering public offer from public.
 Debts: bank loans, debentures and bonds are major sources of funding which are covered
in public funds. Debt funding assist capital projects and helps to maximise profitability
(Rodríguez, Williams and Hall, 2014).
Non-Public funds
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 Office of deputy of prime minister: these are the funds which are generated from
government depositaries and funds. There is a legal structure and procedure is followed
to sanction funds.
 Department of culture, media and sports: with the help of public and media support
funding generated. By presenting positive cultural aspects, charitable events, provisions
and reserves for capital projects are the main sources of funding covered in non-public
funding (Zapata and Hall, 2012).
CONCLUSION
This context is prepared to explain finance and funding with in the travel and tourism
sector. Importance of cost, volume and profitability for management decision making in travel
and tourism sector defined in this report. Use of management accounting information as decision
making tool in travel and tourism business also illustrated in this context. Interpretation of
financial accounts to assist decision making in travel and tourism sectors elaborated on practical
based analysis. Sources of distribution off funding for developing public and non public tourism
sector also analysed.
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REFERENCES
Books and Journals:
Alleman, B. W. And et. al., 2011. Medical tourism services available to residents of the United
States. Journal of General Internal Medicine. 26(5). pp.492-497.
Chen, C. M., Chen, S.H. and Lee, H.T., 2011. The destination competitiveness of Kinmen's
tourism industry: exploring the interrelationships between tourist perceptions, service
performance, customer satisfaction and sustainable tourism. Journal of Sustainable
Tourism. 19(2). pp.247-264.
Ferrer, M. and Medhekar, A., 2012. The factors impacting on the management of global medical
tourism service supply chain. GSTF Business Review (GBR). 2(2). p.206.
Lien, D., Ghosh, S. and Yamarik, S., 2014. Does the Confucius institute impact international
travel to China? A panel data analysis. Applied Economics. 46(17). pp.1985-1995.
Peric, J., Mujacevic, E. and Simunic, M., 2011. International financial institution investments in
tourism and hospitality. Journal of International Business and Cultural Studies. 4. p.1.
Pike, S., 2012. Destination marketing. Routledge.
Rodríguez, I., Williams, A. M. and Hall, C. M., 2014. Tourism innovation policy:
Implementation and outcomes. Annals of Tourism Research. 49. pp.76-93.
Saha, S. and Yap, G., 2014. The moderation effects of political instability and terrorism on
tourism development: A cross-country panel analysis. Journal of Travel Research.
53(4). pp.509-521.
Witt, S. F., Brooke, M. Z. and Buckley, P. J., 2013. The Management of International Tourism
(RLE Tourism). Routledge.
Yang, Y. and Wong, K. K., 2012. A spatial econometric approach to model spillover effects in
tourism flows. Journal of Travel Research. 51(6). pp.768-778.
Yap, G. and Saha, S., 2013. Do political instability, terrorism, and corruption have deterring
effects on tourism development even in the presence of UNESCO heritage? A cross-
country panel estimate. Tourism Analysis. 18(5). pp.587-599.
Zapata, M. J. and Hall, C. M., 2012. Public–private collaboration in the tourism sector: balancing
legitimacy and effectiveness in local tourism partnerships. The Spanish case. Journal of
Policy Research in Tourism, Leisure and Events. 4(1). pp.61-83.
Online
Investment appraisal techniques, 2017. [Online]. Available
through:<https://www.mygov.scot/investment-appraisal/>.
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