Report on Finance and Funding in the Travel and Tourism Sector
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Added on 2020-06-06
Report on Finance and Funding in the Travel and Tourism Sector
Added on 2020-06-06
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Finance and Funding in theTravel and Tourism Sector
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Significance of cost and volume in travel and tourism sector..........................................11.2 Analyse of pricing methods used in travel and tourism sector.........................................21.3 Analysis of different factors which influence profitability of travel and tourism..........3TASK 2............................................................................................................................................5TASK 3............................................................................................................................................53.1 Interpretation of financial accounts to assist decision-making.........................................5TASK 4..........................................................................................................................................13CONCLUSION .............................................................................................................................14REFERENCES................................................................................................................................1
INTRODUCTIONIn a business process, managing financial resources are highly essential. Betterand effective services are being provided to the customers and if they fail to manage themonetary resources in effective manner then they have to face many kind of obstacles. In pastfew decades, travel and tourism sector is being growing on a rapid speed. High revenue is beingearned by most of the companies (Buhalis and Darcy, 2011). This has been done by focusing ontwo areas which is being reduced by cost of business and second one is enhancement in sales byexpansion of company. Company chosen for this report are two various companies which areCarnival Corporation & Plc. And Dalata Hotel Group and they both mainly deals in travellingand tourism industry. There are various things which will be discussed in this report are likedetermination of various types of pricing strategies which are being used by tourism sector whichcan affect the profit ratios of company. Besides this, utilisation of managing accounting data as amethod of making decision which shall be discussed in this report. TASK 11.1 Significance of cost and volume in travel and tourism sectorThere are many parts in tourism industry and they all are significant factors along withplaying crucial role. Operations are being conducted by Carnival Corporation and Plc across theglobe and thus they have now cruise brand here they are able to hold the position biggest luxurywithin world. Explanation of various costs and profits are being described below: Indirect cost:There are various activities conducted for generating revenue but these kind ofexpenses are not included in this. This is considered as highly essential for this kind ofexpenditure as not being same, better facilities can be provided to the clients. Direct cost:There are certain expenses which are being done while manufacturing of productsand services. It is crucial to manage this kind of cost so that profit can be in better manner.Purchasing of cruise tickets for travelling into destination which can be stated as example ofdirect expenditure in travel and tourism sector (Choi and Turk, 2011). Variable cost:Fluctuation is being observed every year. There are unstable in nature and thuscan be high or low in every year. Example can be said of salaries which are being salaried toworker in Carnival Corporation & Plc. And that is example of this expenditure. 1
Rigid cost:Fixed cost is something which remains constant even if any other cost fluctuates, itdoes not affect this kind of cost. Rent paid by the company can be said as an example of fixedcost. Allocation and distribution:Overhead can be stated as expenditure who are not related to directlabour or material. Numerous kind of approaches which are being utilised for allocation of costs.Allocation of fixed cost are not done to all produced unit but later on allocation is being done toeach and every item which are being manufactured. Break even analysis:The make back the initial investment investigation gives you a chance tofigure out what you have to offer, month to month or yearly, to take care of your expenses ofworking together—your equal the initial investment point. The equal the initial investmentexamination table ascertains an earn back the original investment point in view of settled costs,variable expenses per unit of offers, and income per unit of offers.Economies of scale:When the output is being enhanced, then production cost is being reducedlike allocation of fixed cost in more units. This can be stated as name of economics of sale. Themain cause behind success is Carnival Corporation and they mainly focus on enhancing theoutcomes so overall business cost can be reduced (Evans, Stonehouse and Campbell, 2012). Diseconomies of scale: The relation of this kind of term is propelled to rise in marginal costingwhere the enhancement of yield is being done. Mainly this kind of issues originate when thedirector of large sector like Carnival Corporation neglect to regulate their work in an effectualmanner. For instance: Two separate activities which are being participating in cruise trip andeven institution reduced the rate of certain activity then they need to bring the pace later on. 1.2 Analyse of pricing methods used in travel and tourism sectorIt is very hard to set proper price for a product in numerous companies. Sometimes,company thinks that they can increase selling price for same services while some of them mainlyfaces losses due to thinking of customer that prices are much more higher then the expectedlevel. By utilising following pricing methods, high revenue can be earned by company andnumber of permanent clients: Cost led pricing:This can be stated as traditional concept where the total cost is being calculatedfor manufacturing of products and services and thus after that profit percentage is being added inthat for final price. This kind of methodology is being utilised for analysing the cost which arebeing incurred in cruise trip so that certain prices can be charged from customers. 2
Price led costing: Purchasing power of customers have been enhanced in present scenario. Rateof services are being evaluated which are being paid by the customers. There are some clients ofCarnival Corporation who have better purchasable power to avail the best facilities (Evans,Stonehouse and Campbell, 2012). They mainly find out the sum of money which a wealthy clientcan give and then company calculates the price which will incur for desired services. This kindof method is being utilised for the brand of given company along with another one which isHolland America. Seasonal pricing:Companies who are dealing in travelling and touristy sector know whcih theyneed to change the prices as per the seasons. There are some certain peak seasons like for somenations is summer and for some winter is the season due to high demand. But in off season,prices are kept low as there are less customers who avail the services. Rack rate:This kind of rating is highly famous in tourisms department. In this kind of pricing,Carnival Corporation company decides offer cost for the services as this not the last rate as it isflexible. Contribution margin based pricing: In this sort of element, variable cost is being determined bycost. There is the distinction which should be discover among the contrast between set costsalongside factor cost and therefore by this Edge is being set. There is the settled cost which isbeing disregarded.Market based pricing:This can be stated as other part of the pricing related to the othercompetition based. There are services for whom prices are being set and that prices are being setby rate of facility which is present within marketplace. Essential part of the company iscompetitors pricing strategy (Henderson, 2010). Last minute pricing:This kind of rating is being utilised for selling out the stock existing in lasttime. This is mainly finished with the motive of filling gaps and prices on regularly basis.Normally Carnival corporation & plc use this method at the time of peak season. This is beingutilised by at the time of peak season by Carnival Corporation & plc. 1.3 Analysis of different factors which influence profitability of travel and tourismThe main influence in tourism sector is of time period, net income of CarnivalCorporation & Plc. Can be much more in an quarter and thus it can go seriously down in otherdue to off season. There are some elements which as direct impact on the profit like Political3
support, health of economy, social culture and many others. Below is the detailed explanation ofthese factors: Seasonal variation: There is no argument regrading significance of season in tourismsector (REPORTS, RESULTS AND PRESENTATIONS. 2018). This company is present inmany nations liken UK, USA, German, Italy and many more and there is high demand ofcruise specially due to changing season like somewhere it can winter and some where itcan be summer. This states that in off season Carnival corporation & plc will not havedesirable figure of customers and thus their profit will reduced. But in the peak seasonincome will be at high and thus there will be more net income earned. Profitability ratiosof the mentioned company does not fluctuate as there areas of operations are large innature. Political environment: There has been negative impact on the ratios of profit by Brexitspecially to companies dealing within travel and torus sector. Certain amount of revenuewhich will be generated by carnival corporations which mainly comes from Britain.There is the restrictions within political factor specially while making long term policiesalong with profit hindering. (Heung, Kucukusta and Song, 2011). Economic environment: The financial development of European country is moderate innature. The diagram of aggregate requests in these countries are going down andindividuals predominantly are spending their cash on required products. This sort offactor has negative effect on the development of organization and benefit is beingaffected in a horrible way. On the off chance that Carnival organization and plc wouldhave working in Asian reason that they could take the advantage of high monetarydevelopment.Social environment: Civilization which is existing in an economy of country has thepotential to impact business in successful manner. In USA, there is change in markettrend and instead of going on road trip, family is preferring for cruise trip on ships. Thiskind of alteration in culture made an optimistic impact on the net profit of mentionedproject and they have attained large amount of profit (Spencer and Zembani, 2011). Current trend: There has been increment in millionaire and billionaire people. This in turnhas created the supply of luxury services like Cruise trip and or renting their own cruise.Earlier there was perception that cruise is only meant for high class people but in current4
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