Finance and Funding in the Travel and Tourism Sector

Explore the importance of costs, volume, and profit in decision-making for travel and tourism businesses. Analyze financial management using case studies. Understand management accounting information and interpret financial accounts for decision-making. Delve into sources and distribution of funding for tourism development.

Finance and Funding in the Travel and Tourism
Sector
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Table of Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
LO1- Understand the importance of costs, volume and profit for management decision making in travel
and tourism..................................................................................................................................................4
P1.1 explain the importance of costs and volume in financial management of travel and tourism
businesses using Carnival Corporation &plc as your case study..............................................................4
P1.2 analyse pricing methods used in the travel and tourism sector. You should use relevant examples
from different cruise brands of Carnival Corporation & plc....................................................................6
P1.3 analyze factors influencing profit for travel and tourism businesses using Carnival Corporation
&plc cruise brands as your case study.....................................................................................................7
Task2...........................................................................................................................................................8
LO2- Understand the use of management accounting information as a decision making tool in travel and
tourism businesses.......................................................................................................................................8
P2.1 explain different types of management accounting information that could be used in travel and
tourism businesses using Dalata Hotel Group plc as your case study......................................................8
P2.2 assess the use of management accounting information as a decision-making tool for Dalata Hotel
Group plc...............................................................................................................................................15
Task3.........................................................................................................................................................20
LO3 Be able to interpret financial accounts to assist decision making in travel and tourism businesses...20
3.1 interpret financial accounts of Dalata Hotel Group plc for the year ended 31st December 2016
showing at least two years performance (for example comparing 2016 to 2015)..................................20
Task 4........................................................................................................................................................23
LO4 – Understand sources and distribution of funding for public and non-public tourism development. .23
4.1 analyse sources and distribution of funding for the development of capital projects associated with
tourism...................................................................................................................................................23
Conclusion.................................................................................................................................................29
References.................................................................................................................................................30
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Introduction
Finance is the major requirement of any business and it is necessary that it shall be managed in
the best possible manner. For that various analyses regarding the sources and the manner in
which allocation shall be made is to be done. In this report use of cost and profit in decision
making process. Also the manner in which management accounting information will be taken as
decision making tool. Financial statement will be analysed for all the company so that
performance can be evaluated. In this report presentation will be made and also leaflet will be
prepared for the better understanding.
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TASK 1
LO1- Understand the importance of costs, volume and profit for management
decision making in travel and tourism
Report:
Introduction:
Under this report the aspects related to cost, profit and volume will be discussed in respect of
Carnival Corporation &plc. That is one of the best travel companies. It is dealing in cruise brands
in various parts of world which includes Australia, North America and Europe. Also the pricing
methods and actors by which profits are affected will be discussed.
P1.1 explains the importance of costs and volume in financial management of travel
and tourism businesses using Carnival Corporation &plc. as your case study.
Carnival Corporation is one of the largest companies in terms of travel sector and is operating in
various parts. The main aim of this is to provide its customers with the best services. For this it is
needed that cost shall be spend so that all the operations are carried out in an effective manner. It
can be said that for the growth of business, cost is the main factor that shall be taken into
consideration (Macve, 2015). Whereas volume defines the amount that is needed in business so
finance measurement will be covered in this. In the given case cruise facility is provided by
carnival so the cost related to accommodation, food and other facilities will have to be incurred
by it. For the management of finance in proper manner it is required that proper cost and volume
analysis shall be carried out so that all the needs are met on time.
There are various tools which can be used for this purpose and they include:
 Break even analysis: this is required as breakeven is the point where the company will be
in no loss and no profit situation. It means at this point the cost that is incurred will be
recovered and profits will start to flow. So Carnival will have to do this in order to know
the amount that shall be spent and time in which it will be recovered (Bushman, 2014).
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 Economies of scale: This is the process by the help of which cost can be saved by
attaining an increment in the volume. So it can be said that if Carnival focuses on the
maximization of volume then its cost will be saved which is beneficial in long run.
So it can be said that with the help of all this cost and volume analysis Carnival Corporation can
attain various advantages in terms of financial management. This is because cost will be reduced
and y this profits will be increased and this will lead to opportunity for the business to grow
further (Seyidov and Adomaitiene, 2016). Also the decisions can be taken by the use of the data
related to cost which will be useful in investment management as comparison can be made and
can identify what will be trend in coming future for tourism sector.
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P1.2 analyse pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc.
As the Carnival corporation is dealing in cruises so there will be price that will be charged from
the visitors and it is very important that it shall be fixed by use of appropriate method. Under that
it shall be noted that all the cost that have incurred whether they are variable or fixed shall be
taken into consideration. Some of the methods are as follows:
 Cost plus pricing: This is the model in which all the expenses or can say cost are added
and then the profit which is expected to it. By this the total amount to be charged is
determined. Under these factors such as status of visitors, market position will be evaluated.
 Seasonal pricing: This is the method which is most important in travel business because
seasons play relevant role in it. If the cruise is used by visitors in summers then the price at
that time will be fixed at higher rate than the one to be charged in non-peak seasons.
 Market-led pricing: under this market conditions, customer’s opinions and other factors
are considered for fixation of price. If there are other competitors whose services are taken by
customers then the price will be decided by taking all of that under consideration (Macve,
2015).
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P1.3 analyzes factors influencing profit for travel and tourism businesses using
Carnival Corporation &plc. cruise brands as your case study.
The profits that are made in travel sector depend highly on certain factors and some of them are
as follows:
 Political factors: This the factor under which all the government regulations are taken
into use. It shall be noted that the rules and laws which are made at the place of cruise are
complied with as then only profits can be maximized by attracting more customers.
 Competition: In travel sector there is high level of competition as new entrants are there
who offer new facilities and by that visitors are attracted by them. Thus by it profits are
highly affected (Elhaj and Barakeh, 2015). Carnival shall consider the market position of
competitors to maintain its profits.
 Environmental factors. This affects the profits as before travelling people consider
environmental conditions of that place and if they are not favorable then travel is not
considered. So by this profits are also affected.
Conclusion
From the report it can be said that cost and volume analysis shall be done to take important
decisions. Also manner in which prices are fixed is provided together with the factors which
affect the profitability of Carnival group.
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Task2
LO2- Understand the use of management accounting information as a
decision making tool in travel and tourism businesses
P2.1 explain different types of management accounting information that could be
used in travel and tourism businesses using Dalata Hotel Group plc as your case
study
Slide 1
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Slide 2
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Slide 3
The types of information system helps in presenting the adequate and timely information to the
management of the company and assist in efficient decision making processes.
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Slide 4
Financial statements are the documents that are required to be prepared by all the companies
in which all the transactions that took place within an year are recorded (Guinea, 2016). They
are mandatory and are to be made in specified format that is set by standards. The most
important among them are as follows:
Balance sheet: Under this all the assets and liabilities of the company are to be presented.
This is also known as statement of financial position.
Income statements: In this all the incomes and expenses which have been made during a
year are stated. By that the profits that are earned are identified.
Cash flow statement: All the transactions that include the use of cash are to be recorded
under this. This helps in knowing the manner in which cash has been allocated and also if
balance in beginning and end are reconciling with each other.
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Slide 5
Variance analysis is the process in which all the budgeted and actual figures are compared
with each other so that deviations can be calculated. By the use of this it is possible for the
company evaluate the performance of company.
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Slide 6
Budgets are the statements which are made with the use of all the data related to past and also
the assumptions in respect of coming period are made. Under them all the targets that are
required to be achieved in a given time frame are mentioned. With the help of them all the
work will be performed in proper manner.
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Slide 7
This is the point at which company will be in no profit/loss situation. The sales will be of
such amount at which all the expenses which have been incurred are recovered. By this it is
identified that after which level company will be earning profits and then sales will be made
accordingly in order to maximize the profits.
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P2.2 assess the use of management accounting information as a decision-making tool
for Dalata Hotel Group plc
Slide 8
The accounting information provides information to the business managers for strategic
decisions making and helps in implementing control within the enterprise.
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Slide 9
There are various decisions which can be taken with the help of management decision and
some of them are:
Trend analysis: By all the data it can be identified that what is the trend and is the company
working in proper manner or some alteration in systems is required (Siyanbola, 2012).
Investment decisions: The balance of cash that is available with the Dalata is identified and
so it is possible to take decisions regarding the amount that shall be invested.
Rising of capital: The need of finance will be determined and then it is decided that whether
capital shall be raised or not.
Measurement of performance: By the help of data that is available it will be possible to
know the level of performance which is maintained by company.
Reduction of price: As all the data will be collected so it can be identified that which are the
irrelevant cost that can be eliminated and by that overall price can be reduced.
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Solvency: Decision regarding it can be taken as it will be determined that company is having
good position or not and if not that the factors affecting it will be identified. By the help of
them decisions to overcome the problem will be taken.
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Slide 10
18

Slide 11
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Task3
LO3 Be able to interpret financial accounts to assist decision making in travel
and tourism businesses
3.1 interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2016 showing at least two years performance (for example comparing
2016 to 2015).
Report:
Introduction:
In this report financial performance of Dalata hotel group will be evaluated. For this purpose
various ratios will be calculated for financial year ending December 2016 and then they will be
compared with the ratios of past year that is 2015.
The evaluation of any company can be made by the use of various calculations such ad ratios
(Sharifpour, et. al., 2014). There are various types of ratios which can be used in this process.
Some of the important ones are presented below:
Current ratio: This is the ratio under which all the current assets and liabilities of Dalata will be
compared. This helps in knowing that whether company will be able to meet all of its current
obligations in appropriate manner. For this current assets will be divided with current liabilities.
Quick ratio: Under this all the quick asset are compared with the current liabilities. This is used
to know that whether company has sufficient liquid assets to meet its liabilities. The standard that
has been set in respect of it is 1:1. All the quick assets are divided with current liabilities to
calculate this ratio.
Operating margin: this is the ratio under which the profits are compared with sales. So it
determines the rate at which operating profits are earned with the level of sales that is made.
Under this all the expenses that are related to administration are taken into consideration.
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Net profit margin ratio: In this the rate of net profit which is the amount earned after deducting
all expenses is calculated in comparison to sales made. By this it is identified that excessive
expenses are not incurred by company.
Debt to Equity ratio: All the debts and equity which is maintained by company are compared
with one another (GOYAL, 2016). By this is it is identified that whether company is having
much of the owned funds or it has borrowed from market.
Below are presented the calculations of important ratios.
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22
Particulars 2015 (€'000) 2016 (€'000)
Current Assets 162278 98771
Current liabilities 56238 68821
Quick assets 160929 96954
Current ratio 2.89 1.44
Quick ratio 2.86 1.41
operating profits 36957 55607
Revenue 225673 290551
Net profits 21626 34923
Operating margin 16% 19%
Net profit margin 10% 12%
Debt 324040 364994
Equity 537296 620382
Debt-equity 0.60 0.59

From the calculations that are made above it can be noted that current ratio and quick ratios were
better in 2015 but in 2016 they declined from 2.89 in 2015 to 1.44 in 2016 which shows that
company has not invested much in current assets but then also it is near to 2 so it cannot be said
that company is in bad position. Margins which are whether operating or net profit have
experienced an increment and so it is good indicator that Dalata group is earning more profits
which signified growth. The net profit margin was 10% in 2015 which increased to 12% in
2016.Debt to equity is also not very high and it has declined than last year that is from 0.60 to
0.59 which means that company is not taking much of the borrowings and so its fixed charge will
be less. Company will not have to bear much of the interest expense. So, overall position of
Dalata is satisfactory (Pratt, 2016).
Conclusion:
From the report it can be identified that financial position of Dalata hotels group is good and they
have experienced growth since 2015. There are no such indications which represents that any
losses can be faced by company in near future.
Task 4
LO4 – Understand sources and distribution of funding for public and non-
public tourism development
4.1 analyse sources and distribution of funding for the development of capital
projects associated with tourism.
Leaflet:
Title:
Various sources and
distribution of funds in respect
of capital projects.
II. Private tourism
development:
1. Seed capital: In case
of the new business
Conclusion:
From this it can be concluded
that in order to make
investment in capital projects,
funds are required and they
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which are established
recently there is the
need to make initial
investment and that is
known as seed capital.
All of the funds that
are invested are used in
order to carry out the
operations at the initial
stage of business. This
includes environmental
projects and funds in
respect of them can be
obtained from market
or various other
personal sources.
2. Angel investments:
These are those
projects under which
informal investors are
used for the purpose of
collection of funds. For
this all the aspects of
tourism sector are
required to be analyzed
so that all the potential
customers can be
attracted.
3. Retained earnings: in
case of private sector
can be collected from various
sources. They are mainly
classified in two segments
which are public and private.
All of them have been
discussed in detail under this
by the help of which growth
and development can be
achieved.
Introduction:
In the travel and tourism
sector, fianance is required for
many projects and the main
among them are capital
projects. For this it is required
that proper understanding in
respect of various sources and
their allocation shall be
gained. By the help of this
leaflet all of this information
will be gained which will be
proving to be of great help
being a management
consultant.
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this is the main source.
All of it si the amount
that is retained by
businesses from the
profits which are
earned so that they can
be used in later
situations. This is the
source which is risk
free and no additional
cost is required to be
incurred in respect of
it.
4. Equity: This is the
amount which can be
collected by tourism
sector by way of
issuance of equity. All
of those are interested
in issuing capital are
the ones for whom this
proves to be of great
help as no additional
cost is needed under
this. For this purpose
offers are made and all
the interested investors
can buy the shares
(Pulmanis, 2015).
Explanation:
I. Development of capital
project in public tourism
and so resources and their
allocation:
1. Ministry of tourism:
the funds that are
required by public
sector can be obtained
from the tourism
ministry and this is one
of the main sources of
funds for them. It is the
responsibility of
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ministry to provide all
of them with required
funds so that no risk is
faced by them. There
are various small scale
industries or the ones
who have recently
started their business
so by the help of
ministry they will be
able to make their
business secure and
also expand as funds
will be available with
them which they can
invest in various
capital projects. All of
those who needs funds
are evaluated by the
ministry and then
provided with finance
so that they can
maintain their business
effectively and will be
able to retain the
customers and also
attract new consumers.
2. Grants and programs
by tourism facility:
Local community
requires increasing
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their living standard
and attracting more
customers and in order
to achieve this various
programs and schemes
are launched by
government
(TarantinJuniorand
Valle, 2015). By this
the overall profitability
will be increased. For
this evaluation is made
by government so that
they can identify all
the needs and
requirements of
customers and provide
them with the best
quality services.
3. Establishment of
partnerships: Under
this it is required that
local communities
shall build partnership
with the government
so that they can be
made available with
the required funds. By
this their growth can
be enhanced and this
will only be possible
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when goods relations
are maintained among
them. They will be
able to invest in capital
projects by which
development in respect
of long run will be
attained (Pratt, 2016).
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Conclusion
From the report that is presented above it can be noted that finance and funding is very much
important for tourism sector and due to this there are various aspects which have been taken into
consideration. There are many sources from which funds can be obtained and they have been
discussed above. The factors by which profits of the company can be affected have been
explained so that they can be controlled by taking proper steps. Also financial analysis has been
done so that performance can be evaluated.
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References
 Bushman, R.M., 2014. Thoughts on financial accounting and the banking
industry. Journal of Accounting and Economics, 58(2), pp.384-395.
 Elhaj, M.R. and Barakeh, M.Z., 2015. The Impact of E-commerce on Travel Agencies
Profitability in Respect of Size: Evidence from the US.
 GOYAL, P.K., 2016.A STUDY OF RATIO ANALYSIS AS A TECHNIQUE OF
FINANCIAL PERFORMANCE EVALUATION.
 Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting:
Vision, Tool, Or Threat?. Routledge.
 Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.
 Pulmanis, E., 2015. Micro-Economical Aspects of Public Projects: Impact Factors for
Project Efficiency and Sustainability.
 Seyidov, J. and Adomaitiene, R., 2016. FACTORS INFLUENCING LOCAL
TOURISTS'DECISION-MAKING ON CHOOSING A DESTINATION: A CASE OF
AZERBAIJAN. Ekonomika, 95(3), p.112.
 Sharifpour, M., Walters, G., Ritchie, B.W. and Winter, C., 2014. Investigating the role of
prior knowledge in tourist decision making: A structural equation model of risk
perceptions and information search. Journal of Travel Research, 53(3), pp.307-322.
 Tarantin Junior, W. and Valle, M.R.D., 2015. Capital structure: the role of the funding
sources on which Brazilian listed companies are
based. RevistaContabilidade&Finanças, 26(69), pp.331-344.
 Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
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