Barriers to Tourism Development

This assignment delves into the challenges that impede sustainable tourism growth worldwide. It analyzes various obstacles, including economic downturns, political instability, environmental concerns, and cultural clashes. The assessment utilizes research from academic journals and industry reports to illustrate these barriers' impact on tourism destinations.

Finance and Funding in the Travel and
Tourism Sector

INTRODUCTION
Importance of managing financial resources in every business is significant. An
organization can provide better services to their customers but if they fail to manage their
monetary resources in an effective way then they may need to cope up with various kinds of
hurdles (Evans, Stonehouse and Campbell, 2012). Travel and tourism sector has seen a
remarkable growth in the past few decades. Most of the companies of this sector earned huge
revenue as they focused on two areas, that is, is to reduce the cost of business and other is
increment in the sales by expanding enterprise. This report will discuss about the importance of
financial management and its elements. Pricing methods which are used in this industry will also
become a part of this assignment. Factors that affect the profit of firms will be explained in this
report as well. Along with that, use of management accounting system and information will be
covered. Further, important ratios and other financial data will be calculated at the end of this
report with discussion on sources and distribution of funding.
TASK 1
1.1 Significance of cost and volume in travel and tourism sector
Proper management of financial resources is essential for gaining long term benefits.
Tourism industry has many parts, hotel, tour operations, etc. which are its significant
components. Carnival Corporation & plc are operating their business in different countries. (Choi
and Turk, 2011). They have a popular cruise brand and they take position of largest travel
organization in the world. Importance of costs and profits are-
Indirect cost – The expenses are not related with profit generating tasks. Its examples are
administration expenses, rent, etc. This importance of this kind of expenditure is high because
without same, an organisation can provide better facilities to their clients.
Direct cost – These are the expenses done on production of goods or services provided to
the customers. Managing this cost in an effective manner is crucial for increasing the profit of
organisation. Purchasing tickets of different travelling places are most suitable examples of
direct expenses in travelling and tourism industry.
Variable cost – These types of expenses fluctuate every year. They can be less in the
present year but this does not mean that they will not increase in the coming future . This cost
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changes with the alteration in output (John and Susan, 2015). Carnival corporation company paid
salary to staff members is example of this cost.
Fixed cost – It does not matter whether the output goes down or up, this kind of cost does
not change. Rent paid by this company is an example of fixed cost. Whether they provide
services to more people or shrink their operations, this expenditure does not fluctuate.
Allocation and apportionment – Overheads are the costs which are not connected with
material or direct labour. There are different techniques of allocating expenses. This can be
done by marginal or absorption costing. Initially the fixed cost are not divided in every unit
which is produced and later they are allocated in every produced unit.
Break even analysis – This technique of management emphasise on the units which are
sold by firm. Thus could be made monthly,quarterly and yearly. This is a point where company
covers its cost and after the cross of this level they will start earning profit (Morrison, 2013).
Economies of scale – When an organisation increases their output, the cost of production
decreases due to various factors like allocation of different expenses in various units. This is
called economies of scale. Main reason behind success of company is that they want to reduce
expenses of business and hence they can enhance their outcome.
Diseconomies of scale – It is related with increase in marginal costs as output increases .
These issues can arise when company cannot manage the employees in proper manner. For
example if firm reduces speed of one task then they have to maintain pace of another if company
is involved in two tasks.
1.2 Analyse of pricing methods used in travel and tourism sector
Deciding an suitable price is tough activity for many companies. Sometimes firm feels
that they can charge higher price from customers and in remaining times consumers thought that
prices are high according to their expectations so company have to bear the losses. Through these
pricing techniques, company could earn huge revenue and increase number of their permanent
clients:
Cost led pricing – This is a traditional concept where they first make total of the cost
incurred in producing unit or service and then desired profit is added to it for reaching at final
price (Buhalis and Darcy, 2011). Some brand of Carnival corporation and plc is using this this
method of pricing, they analyse the cost which is incurred in a cruise trip and then they add
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desired profit for ascertaining the price which they have to charge from their consumers.
Carnival corporation brand P & O have followed this pricing method.
Price led costing – Now company knows that earning capacity of consumers have
increased. Evaluation of services can be done through money which buyers can spend. The cost
which is to be incurred is also decided by final price. Some brands of Carnival corporation and
plc know that their clients are ready to any amount for better facilities, their method of pricing is
different. They first determine the amount which rich clients can pay and then determine the cost
which they are going to incur for providing them desired service. Holland America line is
example of a brand of above discussed firm who is applying this technique.
Seasonal pricing – Companies which are running their business under tour and travel
industry cannot charge same prices in all seasons. (Gibson, Kaplanidou and Kang, 2012). In
peak season ,which can be winter in some nations are summer in other, they charge more money
form the client because of high demand. But in off season, when the demand is low, they do not
ask more money money because they know that they will fail to get desired number of
customers.
Rack rate – This form of pricing is very popular in tourism sector. Under this pricing, an
organisation like Carnival corporation and plc decide office price for their service and it is not
last rate as it can be changed.
Contribution margin based pricing – Under this technique price can be calculated through
variable expenses. Contribution margin can be calculated through differences between fixed and
variable costs per unit. Fixed costs are not considered as they do not changes with level of
output.
Market based pricing – It is also known as competition based pricing. The prices of
products and services can be calculated through market rate of different products. Evaluating
prices of rival are crucial part in this method. (utra and Edwards, 2012).
Last minute pricing –In this pricing method there is sell of goods which are existed in last
minutes. This is applied as to fill gap and prices are decided on routine basis. Firms applies this
method in peak season.
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1.3 Analysis of different factors which influence profitability of travel and tourism
Tour sector is highly impacted through seasons, revenues of Carnival Corporation & plc
can be high in one quarter and it can be reduced when then there is no demand. Political,social
and economic factors can influence profits of company.
Seasonal variation – No one can argue about the significance of season in tourism sector.
This company in present in many nations such as Germany,USA,U.K. Italy etc. Demand of trip
can be increased in summer season of some countries and it can be high in winter seasons of
some nations. This proves that it cannot attract consumers in off season and thus reducing
profits. (Song and Lin, 2011). But, in peak load their revenue will be high and they will easily
register more profit because of high demand. Because of the large area of operations,
profitability of mentioned enterprise do not fluctuate much.
Political environment –Tragedies such as Brexit have a negative influence on revenues of
firms which are running business in tour industry. (Ritchie, Amaya Molinar and Frechtling,
2011). Carnival corporation and plc have taken major earning from Britain. Due to this
instability company cannot create long term strategies and it reduces the revenues.
Economic environment – The growth of economy is not rapid. Demand is reduced in
these nations and public is spending money on necessity goods. Due to this it has reduced the
profits and growth of firm. If company is running their activities in Asian region then it results in
high economic growth.
Social environment – The values and ethics,culture in nation can influence business in a
(Morrison, 2013). Market is changing in USA,people are preferring to go on cruise trips for
enjoyment and do not prefer road trips. Due to these changes it has increased profits of company
. In upcoming time they can encash more benefit from this opportunity.
Current trend – The number of millionaire and billionaires in continuously increasing.
Demand of services such as cruise trips and renting of cruise have increased. Initially people
thought cruise trips is for high income families but due to changes in market it proves that
normal income families can select cruise trips. (Spenceley, 2012). This shirt in current trend can
be consider as one of the main cause behind high profitability of mentioned corporation.
Bad debts – Their is no doubt that bad debt make a negative impact on profitability. But
mentioned corporation has sound management according system and by making account
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receivable report, they save themselves from this issue. When firm do not solve issues related to
bad debts then main brand such as Fathom earns high revenues.
TASK 2
2.1 Different kind of management accounting information which used in tourism sector
Basically, data analysis is a process in which data is collected and set in a organized way
so that someone can derive helpful information from it. The basic aim of this is to know what
the data is trying to tell the researcher and in the other way they put efforts to know what the
data is showing or not showing.
Budgets – Their are various kind of budget, an organisation can the appropriate one
according to their need. A master budget is made by focusing on long term goals of company, it
is not made for one or two department, whole enterprise is taken in account at the time of
forming this budget. It assist is reducing the confusion among various division and shows a clear
path to all the employees which they have to follow in upcoming time. Cash budget is made for
managing the cash in an effective manner. It assist the company in running their business in
smoothly i.e. without any hindrance.
Financial statements – This statements shows all the significant details about a company.
Income and expenditure account depicts all the expenses which organisation has done for
performing various business activities and other side of this statements reveal the money which
company has earned through various source. This is a formal record so stakeholder can use for
for making the decision like whether they show invest in a company or not.
Variance analysis – This analysis is done for finding the difference between planned and
actual behaviour. For examples, if Dalata hotel group is made a budget of 10000 pounds for
advertising and they earned 12000 then this means that they difference is positive and they have
earned 2000 more then their estimation.
Forecasts – Forecasting is done for by analysing market trends and the vision of the company.
Planning tools are used for making budget. Forecasting is essential because it reveal various
resources will a department will be needing in upcoming time. The importance of planning tools
has increased due to the increasing uncertainty in the business environment. Planning tools make
sure that resources are used it the best way possible.
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Management information system – MIS is usually a decision making tool which is used
manager of many companies. Dalata Hotel group should explore various new technology of MIS
where the data is stored and managed in a systematic and effective way. The use of this system in
important because it record all the necessary information at one place.
2.2 Utilisation of management accounting information as a decision-making tool
Comparison of trends – This management accounting system stores the data, when
manager of an organisation have information regarding two years and can make comparison
bewtween 2 years and can take decisions. Hotel Dalata can apply MIS for evaluating
availability of room in two trend, they can evaluate recorded data and make decision relating to
various policies accordingly.
Forecasting – Organised data help in better forecasting on events. The prime concept run
behind forecasting is to analyse past records and then make predicts. Dalata can use MIS for
making decisions regarding expectation of sales. Thus it assists company in dividing financial
and remaining aspects in efficient ways.
Investment – Making decision regarding the areas in which company has to invest money
not an easy activity. MIS process the data is appropriate way and it record information
regrading key element like past investment, sales etc. Dalata can attain benefit by using system,
it will support them in making right choice in right time relating to investment.
Raising capital – If a company will save important information in an organised way then
they can use it to convince potential investors at the time of raising funds. Dalata is currently
running in 3 and 4 star hotels. If they want to enter in 5 star segment then by using MIS they can
gather more capital.
New product and service – Dalata is providing various kind of services to their
customers, by using MIS processed data then can identify which the need of new product
development. Organised old data can be used at the time of developing new service. One of the
most important use of MIS is that it deliver fast results, lot of information can be process in few
seconds by using this system. This company can launch many new services and make decision
relating to their in sort time period. If they think that prices are high or low then they can change
it by using MIS as, it will not take much time.
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TASK 3
3.1 Interpretation of financial accounts to assist decision-making
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Cash flow statement – Financial statements contain different document, cash flow
statement is among them. Its significance is high because it shows all the cash which can entered
or gone out of the organisation (REPORTS, RESULTS AND PRESENTATIONS. 2015). It has
three parts first are operations in which cash inflow and outflow are recorded. (Henderson,
2010). Next is investment in which firm can invest their money to buy fixed assets. Third part is
financial activities which includes tasks such as receiving long term loan. Dividend paid to
shareholder is included in this activity.
Trading account – Income statement has two sections, one is trading and second is profit
and loss account. It is the first page of final accounts which provide details regrading gross
profits or losses. (Vanhove, 2011). This section of income statement includes data about
services,cost of good sold and credit sales.
Profit and loss account - This part includes details regarding net profit or losses which
can be given to stockholders. The data is for a particular fixed period of accounting and parts
like legal costs ,office expenses and salary are included in this part.
Balance sheet – It provides financial position of firm in a specific accounting year. The
statements of assets. Data of assets and liabilities of company are included in this part and
remaining balance can be taken from accounts of ledger.
Measurement of Dalata's financial performance
Current ratio – This ratio is determined through dividing of current assets and current liabilities.
In this method, current ratio is 1.44 of hotel Dalata and it was 2.89 in 2015. It proves that current
assets have reduced as compare to current liabilities. In 2016 current assets was 98771 pounds
and they were 162278 pounds in 2015. Through this data firm cannot take long term decisions
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but it can be used in short decisions. (Tribe, 2015).Hotel can increase current ration as they had
more capabilities to give good results.
Current ratio
2015 2016
2.89 1.44
Acid test ratio - The ratio is determined by subtracting stock from current assets and then it is
divided by current liability (Pike, 2012). Earlier in 2016 acid ratio was 1.41. This is not bad
performance nut it has not gained success as compared from last year. . In 2015, ratio was 2.86
which shows good performance.
Acid test ratio
2015 2016
2.86 1.41
Return on capital employed – 4.98 – 2016, 5.82 – 2015 Ratio is determined by making
difference in net operating profit from capital employed ( Heung, Kucukusta and Song, 2011). It
shows the profits earned by firm and with employment of capital in particular area it shows the
efficiency of firm to generate revenues. In 2016, return on capital employed of Dalata was 4.98,
it was 5.82 in 2015. Although they this ratio has decreased but still it is good.
Return on capital employed
2015 2016
5.82 4.98
Return on net assets – Assets and working capital are significant part of a company. This ratio
reveal their effectiveness and efficiency on a company in managing these two important
elements (Wong, Mistilis and Dwyer, 2011). This amount is determined by dividing net income
of an organisation by working capital and fixed assets. In 2016, this ratio of Dalata was 3.78, it
was 0.04 points more then last year. This shows that they are using their fixed assets and
working capital in more effective way compared to last year.
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Return on net assets
2015 2016
3.74 3.78
Net profit ratio – 12.02 – 2016, 9.58 - 2015 This ratio is ascertained by dividing net income
from net sales. Dalata registered net profit ratio of 12.02 in 2016, it was better then 9.58 (2015).
This ratio provide information about operational activities of company.
Net profit ratio
2015 2016
9.58 12.02
Stock turnover ratio – 69.40 – 2016, 89.50 – 2015 This ratio explain about the sold and replaced
inventory. This ratio is determined by dividing cost of goods sold from average inventory of a
particular period. This ratio was 89.50 in 2015 and 69.40 in 2016. These figures are decent and
but there is huge scope of improvement.
Stock turnover ratio
2015 2016
89.50 69.40
TASK 4
4.1 Sources and distribution of findings for public and private tourism development
Funding concept is provided by concerned department ministry of development and
welfare in tourism industry. Some sources are-
Department of culture, media and sports:It helps in development of campaign enhance life and
promotes good aspects as they are crucial in tourism sector. Through financing of inno0vatibe
and unique ideas firm can protect cultural and artistic heritage and other businesses. (Evans,
Stonehouse and Campbell, 2012). Thus it leads to development of economy and create respect in
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such regions. Growth of tourism means motivating people in preserving of heritage places.
Media plays important role as it can attract people through newspapers and television.
Capital projects:
It relates to the huge amount of investments that is required to add for modifying a project.
Accomplishing these projects without having fine financial and human resource is not possible.
It involves acquisition of assets or lands, property lease or in the purchase of new equipments.
Promotion of this sector is not possible without increase number and amount of capital projects.
There are many capital budgets that is associated in this sector:
Cross railway projects are playing crucial role in economical growth of rural areas.
(Nielsen and Spenceley, 2011). Most of the problem in tourism sector is related to accessibility
and feasibility. Resolving these troubles is not possible without increasing the capital projects.
Tourism Information centre Whenever people like to get some information about tourism then
they Tourism Information centre is the best option for them.
Heritage interpretation is all about such information that are communicated to its visitors
as educational and national park like museum. It includes origin, nature and purpose of historical
objectives based on non personal and personal techniques.
Integrated foot print development and improvement of such regions would assist
individuals and firms to put right foot in appropriate direction as development of tourism sector.
Continuous improvement is done to enhance profitability.
There are two sources using which financing can be done for tourism:
Public finance: It is related to the role of government in relation to the economy. In other
words it is a branch of economy that assesses the sale of government as well as expenditure:
Venture capitals: It is the capital that is invested in the primary stage after analysing a
firm
Debenture: Debt is stated to be most economical mode of finance as compared to equity
since they do not share any control with investors (Wong, Mistilis and Dwyer, 2011).
Equity share: Big firms like to use this option because it does not put the pressure of
debt on them.
Internal source or Non public finance are:
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Owner's investment: This is the amount which is invested by owner itself. Although
entrepreneurs do not prefer to invest money from their pocket because it impact their personal
life but sometime they do not have any option.
Retained profit: This is the money which is save by company for various purposes like
for investing it again in business or for buying new assets.
Debt Collection: Getting huge amount of payment from the debtors is fine source of
finance.
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CONCLUSION
From the above report, it can be concluded that financial management is significant for
every firm. Travel and tourism sector has adopted different method of pricing like last minute,
cost based pricing. Their are many external factors which have ability to change the profit of a
company, political, social etc. are some of its example. Management accounting information is
used for increasing the efficiency of the company so they can attain their goals in an effective
manner. Financial accounts reveal performance of an organisation in a particular period of time.
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REFERENCES
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