Finance and Funding in Travel and Tourism Sector

Finance and funding in
travel and tourism sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of costs, volume and profit in travel and tourism........................................1
1.2 Pricing methods that are use in travel and tourism...........................................................2
1.3 Factors that are influencing travel and tourism................................................................3
TASK 2............................................................................................................................................5
Covered in PPT.......................................................................................................................5
TASK 3............................................................................................................................................5
3.1 Interpretation of financial accounts to assist decision-making.........................................5
TASK 4..........................................................................................................................................13
Covered in Poster ................................................................................................................13
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance plays an imperative role for every business organisation in order to operate daily
working activities and functions. Proper management of financial sources helps to make a
business more profitable and attaining its goals and objectives. It is essential for business units to
determine various sources of funding so to improve the quality of its products. In UK, travel and
tourism sector is known as one of the leading sector so as that if travelling companies are failed
to manage its monetary resources then it cannot cope up with obstacles (Buhalis and Darcy,
2011). Furthermore, travelling sector also contributes highly since past few decades; for earning
higher revenues of tourism firms focuses on reducing costs. Apart from this, the report will
describe significance of cost and volume in financial management. Readers will also come to
know about various pricing methods and certain elements that can affect travelling business.
Several types of management accounting are used by companies for accomplishing their goals
and objectives will be covered. It also aids in decision making process. At last, sources of
funding for growth and development of projects that are linked with tourism industry will be also
explained.
TASK 1
1.1 Significance of costs, volume and profit in travel and tourism
Cost plays a prominent role in every business whether it is small sized or large sized in
increasing the wealth of the organization. It includes all financial aspect which is spent for
production of products and services, but in travel and tourism sector major cost is incurred in
providing the customer services and promotion of tourism industry.
Cost: It refers to the expenditure which is made during carrying out any business
operations or processes in relation to the industry. It is entailed as an important element in travel
and tourism because cost includes whole costs which is obtained while delivering customer
services and planning of further resources as well (Choi and Turk, 2011). Carnival Corporation
& Plc focus their attention to manage the cost structure in order to find the cost control
opportunity. They have adopted travel inventory management system (IMS) and booking system
to carry out their operations. The system of ERP helps to control cost and leads to revenue
growth. There is various types of cost that are with tourism sectors:
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 Indirect cost: It is a cost which is indirectly incurred while performing manufacturing of
goods and services. It comprises with Direct labour, material and overheads. It is similar
to fixed cost which may include taxes, factory rent, tools expense, manufacturing
expenses. Indirect cost helps the company to determine their total cost and labour which
is require to give the proper support to its customers. Carnival Corporation & Plc incurs
costs like power consumption, nails and screws, factory depreciation, manager's salary
etc.
 Direct Cost: It includes all those expenses which are direct and can be traced easily. It
directly impact the production process which is used in functional planning of tourism
industry as they are calculated on the basis of master budgets which are based on future
estimation to incur maximum profit. Carnival Corporation & Plc experience cost of the
processor in a computer.
 Fixed Cost: This cost remains fixed or constant and do not change with a change in level
of output. It will not going to change in future and is time related. For example rent,
salary, fees, duties. Valuation of inventory does not consider fixed cost and is one of the
component of total cost. This company acquire cost of salary to tourist guides which
remain fixed throughout. Its main feature is that it is not affected by the momentary
movement in the activity levels of the company.
Allocation and appointment of overheads: This cost is used to measure the long term
cost and helps in determining the product cost or price. It cannot be interconnected with the
particular department on suitable basis (Evans, Stonehouse and Campbell, 2012). There are
several methods available in determining the absorption of overheads. The two important
methods are: on the basis of labour hour rate, on the basis of machine hour rate.
Break even analysis: It includes the level of fixed cost in relation to the position of no
profit or loss. It is that point in which market price is equal to the original cost. The estimation is
done regarding the sell to be done monthly or yearly.
Importance of cost and volume in the financial management
 Costs plays a crucial role in business in terms of raising business profits and revenues for
a company.
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