Finance and Funding in the Travel and Tourism Sector

FINANCE AND FUNDING
IN THE TRAVEL AND
TOURISM SECTOR

INTRODUCTION
Finance plays crucial role in each and every business whether it operates under travel and
tourism (TTM) sector or any other. With this particular element several kinds of aspects involved
which are used in the company. Present study is based on Merlin Entertainment Plc (MEP)
which operates in TTM sector and has presence in more than 127 attractions. The project shows
cost volume analysis which is used by the company in order to manage financial resources at the
workplace. There are wide range of elements which lead to create impact on profitability of the
MEP firm, are described in the study. Apart from this, the project emphasises on information of
management accounting which are taken into account for making fruitful business decisions.
Beside this, business performance of The Restaurant Group Plc is analysed over the period of
two year by taking base of financial ratios. At the end of report, source of financing are
explained which are supportive to raise capital in the MEP company.
TASK 1
1.1 Explaining significance of costs as well as volume for managing financial in Merlin
Entertainment Plc
Under the finance cost and profit these two factors are highly considered and on the basis
of this business performance can be analysed up to certain extent. In the Merlin Entertainment
company if level of costing is high, then it has to charge more prices of its tour products.
Therefore, selling as well as profit affects in negative direction which lead to decline proper
management of financials (Arestis and et.al., 2017). At the time of managing business resource
i.e. financial, different methods and aspects having significant place which are mentioned below:
Different costs: Expense plays major role at the workplace because until and unless an
entrepreneur not makes expenditures then unable to generate product and services. Wide range of
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costs are included for manufacturing items in the company which are generally segregated in
four parts. Major four types of costs are like fixed, variable, direct and indirect. Along with this,
it is mandatory to manage all the expenses in the company because if it increases then affects
overall profitability. By using cost management strategies, Merlin Entertainment able to reduce
total expenditures which lead to decline cost of production (Xiao and North, 2017). When whole
expenses are declined then it is sign of proper utilisation and management of financials in the
workplace of TTM firm.
Allocation of resources: Another factor by which the cited entity can manage costs are
allocating financial resources in adequate and proper direction. If the costs are allotted in
different functions of MEP in inadequate way then management of financials affect up to the
higher level. To which department of the firm, how many resources need to allocate is to be
determined with the help of availability of the overall profit and financials. Due to lack of proper
resource allocation system smooth business functioning of MEP affects in negative direction
(Ravikumar and et.al., 2017). Therefore, it can be said that, better resource allocation system has
major place for managing financials at the workplace.
Economies of scale: The criteria at where cost of production is lower and final output is
higher, considered as economies of scale. In the company as level of production increases then
total expenses affect in favourable position of the entity. When MEP firm arranges more tour
products, then its total cost declines by which it able to meet with the economies of scale.
Therefore, available resources can be managed in proper direction which is sign of enhancing
profit in the company (Tyl and Lizarralde, 2017). Henceforth, to administer financials at the
working environment, economies of scale having important role.
Break-even analysis: The point at which company generates neither profit nor loss at the
end of year is known as break-even. With the help of this, the Merlin Entertainment Plc able to
derive that how many units needs to produce along with the sales require to generate at the end
of year. On the basis of these assumptions, resources are provided by which financials manages
effectually at the workplace of MEP.
1.2 Analysing methods to take pricing decisions in the travel and tourism segment
Apart from cost, price is another highly important factor for the company which supports
to generate revenue and profit at the year ending. When the prices of tour products and lower and
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attractive then Merlin Plc able to increase turnover. Several types of methods and techniques are
available which help to the management of TTM enterprise for taking better pricing decisions.
Further, various strategies of deriving prices are such as follows:
 Cost led: Basic method which considered for assessing price of tour products is cost
based in which at the initial level total expenses are calculated. Once overall cost of the
goods is derived then compute quantity of final output in same period. Moreover, by
taking base of total production cost and units the Merlin makes pricing decisions (Pricing
Strategies, 2016). For example: total cost incurred to manufacture 100 units is worth of
5000 GBP. In this case, base of making pricing decision will be worth of 50 GBP per unit
(5000/100).
 Market based: According to this, firstly analysis of the overall market is researched
where generally demand and supply these two factors assessed. In the market, if demand
is more of the tour products and supply is low then more prices will be charged by Merlin
Entertainment firm. On the other hand side, if market condition is poor along with
demand low then it will take low pricing decisions (Jiménez-Castellanos, 2017). Apart
from this, in the peak season or holidays, charges of the tour packages will be higher and
vice-versa.
 Competition led: The strategy of pricing under which competitors of Merlin
Entertainment are considered as a base is known as competition led pricing method. In
the industry, if level of competition is high or cut throat then lower prices will be charged
by MEP firm and vice-versa (Eyckmans, Fankhauser and Kverndokk, 2016). Major rivals
of the Merlin entity are like TUI group, RoomKey, ClubCorp etc. For example: for the
Singapore trip rivals charges 18000 GBP then Merlin will take pricing decisions lower
than 18000 like 16000 or 17000 GBP.
 Cost plus pricing: Under this method, cost of each product unit is measured at the
initially and then go for further procedure. Once the cost of tour package is determined
then Merlin Plc sets percentage of profit which it wants to charge. Further, in the cost
profit margin is included and whatever outcomes is considered as price. For example:
cost of each US tour is worth of 14000 GBP and profit margin is 20% then price will be
worth of 16800 GBP (14000 + 20%).
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