Finance & Funding in Travel & Tourism Sector (pdf)

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Finance and Funding in theTravel and Tourism Sector
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3LO 1.................................................................................................................................................31.1 Importance of cost and volume in financial management................................................31.2 Analysis of various pricing method used in the organization..........................................41.3 Factors influencing the profit of travel and tourism sector..............................................5LO 2.................................................................................................................................................6LO 3.................................................................................................................................................63.1 Interpretation of financial accounts of Audley travel group Ltd......................................6LO 4...............................................................................................................................................124.1 Different sources and distribution of funding for the capital project development.......12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONTravel and tourism sector provide the various product and services to their customers like the Holiday trips, tours, adventurous program,ski and snow trip, hotel rooms, food etc. to their customers. To provide all the facility they need fund from the different sources to fulfil theirrequirement. Hotelplan Holding Limited is a private limited company which provide the travel and tourism facility to their customers. Theyprovide the various services like cycling Holidays, family holidays, northern light adventures, snowboard holidays etc. to attract the customerand retain the customer in the company.This report highlight the importance of cost, profit and volume in management of travel and tourism sector. It explains the variouspricing methods used by the organization to improve their performance. It also explains the various factors which influence the profit of thetravel and tourism sector. It highlights the various accounting information and their uses in the travel and tourism sector. The report providesinterpretation of financial data and their comparison of travel and tourism sector. It also helps to understand the various sources of funds and thecapital projects.LO 11.1 Importance of cost and volume in financial managementThere are different cost in the organization which are associated with the company like direct cost, indirect cost, variable cost, financecost, allocation and apportionment etc.Direct cost :Direct cost refers to the cost which are directly related to the production of goods and services in the organization(Camilleri, 2018). Some example of direct cost are labour, material, expenses and distribution cost. Hotelplan holding limited use the direct costto estimate the direct expenses of the Hotel like wages and salary of labour, the material used for enhancing their services like computers,laptops, buses etc.Indirect cost :Indirect cost is the cost which is not directly related to the production activity like lightning, rent, depreciation etc. Theestimation of indirect cost help the Hotelplan Holding limited to manage their expenses and prepare the financial plan for the organization.Through the estimation of the indirect cost, they can easily manage the cost of the cabin crew, staff members etc.Fixed cost :It always remains fixed in the organization irrespective of the number of units produced (DIFFERENT WAYS TOCATEGORIZE COSTS,2018.). Fixed cost help the Hotelplan holding limited to measure the performance of the organization by estimating theoverhead like depreciation on machinery, rent, salaries of the staff etc.Variable cost :Variable cost varies with the change in output. If the Hotelplan entertain more customer than the variable cost like bed,furniture, food also increases. The variable cost of the organization is important to visualize the cost to prepare budget and activities to increasetheir sales and profit of the organization.In the context of hotel unit, cost assessment is highly required as it helps in setting prices for the services offered. Referring all costsmanager of hotel unit can assess cost per customers and by adding profit margin into it prices can be determined.Importance of volumeBreak even analysis :Break even point refers to the situation where the cost of the organization is equal to its revenue. It helps inmaking decision for the organization. It is important for the Hotelplan Holding Limited to determine the number of customers visited andattracted toward the travel and tour plan (Gurtner, 2016). It also helps in budgeting and setting target, determine the profit margin and controland monitor the cost of the adventurous programme, buses fair or rent etc. By analysing the relation of cost and revenue in organization they caneasily estimate the position of the business and prepare the budget for the financial and non financial activities like promotion of Hotelplan,salaries and wages of the company staff, lightning, rent of their offices and the various equipment use for the safety of the customer.Economies of scale :By increasing the production and reducing the cost of the product and services a company can achieve itseconomies of scale. It is important for the Hotelplan Holding limited to reducing the per unit cost in attaining the customer and increasing theirprofit. By expanding their scale of production they can easily achieve their target and increase their productivity and performance. They can alsonegotiate with their suppliers to provide discount on the hotel rooms and food services.1.2 Analysis of various pricing method used in the organizationThere are various kinds of pricing methods used by the organization to estimate their price and enjoy the competitive advantages in theorganization likeSkimmingpricing, penetration pricing, cost plus pricing etc.Penetration Pricing :Penetration pricing is used to attract the customer by lowering the price in the initial stage and then increasing theprice of the product and services according to their profit margin (Xu, and et.al., 2016). They lower the price of goods and services to capture theattention of the customer and provide them the better services in compare to the competitors in the market.Skimming pricing :In screaming pricing strategy company charge the highest price from the customer which can be bear by thecustomer to fulfil their demand or customer is willing to pay. Then they lower the price to attract more customer toward the organization product3
and services. In other words skimming pricing is a pricing strategy in which initially company charge the higher price and in latter stage they cutdown their prices to attract the more customer (Kienzler, and Kowalkowski, 2017).Cost plus pricing :In cost plus pricing strategy company add the profit margin in the total cost of the product and services. It mostlyused in government project where government forces the suppliers to control the direct, indirect and fixed cost of the offered product andservices.Competitive pricing strategy :In competitive pricing strategy, firm set the price of goods and services according to the price ofcompetitors in the market. They analyse their price of the competitors and reduce or increase the price according to the competitor price. It helpsin monitoring the activities of the competitors in the market and evaluate the fluctuation in their prices.Hotelplan holding limited use the penetration price in the organization. They provide their services on lower price in initial stage toattract the customer towards the business. Customer need the qualified and safe products and services within the minimum price. When the priceof the product and services are lower than the competitors', customer are more attracted toward the business and enjoy their service and whencustomer is satisfied with the services they raise their price to meet their target and increase the profit of the company (Li, and et.al., 2016).In off-season Hotelplan Holding limited use the competitive pricing strategy in the organization. They analyse the price of the othertravel and tourism business in the market and if they lower down their prices than the Hotelplan also lower down their prices.1.3 Factors influencing the profit of travel and tourism sectorThere are various factors which influence the profit of the Hotelplan holding limited. The external and the internal environment bothaffect the profit of the organization by direct and indirect way. The factor which affect the profit are season, weather, political environment,travel trends etc.Season :The travel and tourism industry is depended upon the seasons. In summer season most of the people are love to travel in coldplaces and spent their holiday. The large number of foreigner comes to visit the places of UK in winters. Hotelplan holding limited can raisetheir prices to earn the more profit. In off-season, they can lower down their prices to attract the local people and also earn the profit in off-season. In high season they increase their prices of flight, buses, hotels to earn the higher profit (Factors Affecting Travel And Tourism Industry,2014).Weather :The weather of the country also affect the business of travel and tourism sector. In the case of good weather customers aremore interested to prepare the trip plan and enjoys the rides. It increases number of visiting customer, productivity and profitability of theHotelplan Holding limited. In winter, the profit of the Hotelplan holding limited increases because they offer ski and snow trip holidays trips totheir clients. In bad weather like the natural disaster the business of the Hotelplan Holding limited is also affected. It reduces their profit becausethe number of visitors are reduces.Events :The various events organized by the organization also influence their profit. On the special events like festivals, holidays,Olympics increases their profit. On the special events people prepare their plan to travel and reduces the daily work load of their life (Ruan, andet.al., 2018). The travel and tourism industry offers various services and facility on the special occasions like discount on family trip, extrafacility etc. It helps them to increase the profit of the organization. Hotelplan holding limited change their strategies in the special events toattract the customer and earn the higher profit.Travel trend :The changing trend in travelling also influence the profit of the organization. Trent refers to changes in the activities,product and services from the one year to another year. The media and marketing spread the trend in the market like the trend of destinationwedding and the sports events etc. The trend of destination wedding influence the people to visit that places and organize such events in thatplaces which ultimately increase the number of customer and profit of the Hotelplan holding limited.LO 24
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