Finance and Funding in the Travel and Tourism Sector

This paper explores the crucial role of finance and funding in the travel and tourism sector. It examines the importance of cost and volume analysis, pricing methods, and profit influencing factors. The paper also delves into management accounting information and its use in decision-making. Furthermore, it analyzes the sources and distribution of funding for capital projects in tourism, using Dalata Hotel Group as a case study. The paper concludes by highlighting the significance of effective financial management for the growth and success of travel and tourism businesses.

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Finance and Funding in the Travel and
Tourism Sector
Student Name:
Course:
Submission Date:

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Table of Contents
Introduction......................................................................................................................................3
Task1................................................................................................................................................4
1.2 Explain the importance of cost and volume in financial management of travel and tourism
businesses....................................................................................................................................4
1.2 Analyze pricing method used in the travel and tourism sector..............................................5
1.3 Analyze factors influencing profit in travel and tourism sector............................................7
Task2................................................................................................................................................8
2.1 Explain different types of management accounting information that could be used in travel
and tourism business....................................................................................................................8
2.2 Assess the use of management accounting information as a decision- making the tool.......9
Task3..............................................................................................................................................10
3.1 Interpret travel and tourism financial accounts...................................................................10
Task 4.............................................................................................................................................13
4.1 Analyze the sources and distribution of funding for the development of capital projects
associated with tourism..............................................................................................................13
Conclusion.....................................................................................................................................15
Reference.......................................................................................................................................16

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Introduction
Finance and funding is a vital concept because travel and tourism business requires the
appropriate amount of capital and time for the business in order to realign the growth of the
business towards achieving its business objectives and goals for the betterment of the economy.
Travel and tourism are just like any other business which requires a good investment in order to
gain more profit and therefore financial management concept are vital in the entire business
activities (Guliani & Rizwan, 2016).When the industries that are dealing with travel and tourism
business are organizing their activities, then cost volume and profit analysis is done together with
the right pricing strategy. As a business sector whose concern is based on profit making the
factors that are constituting profits are given priority in financial analysis. Business is operated
under a good accounting management and the organization has to deliver investment report to
avoid any problem that may arise in relation to those regards. Interpretations of the travel and
tourism company can be well done using ratio analysis. The travel and tourism companies are
exploring the entire world and therefore, they need sufficient funding for the projects.

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Task1
1.1 Explain the importance of cost and volume in financial management of travel
and tourism businesses.
The business is finding its analysis by getting the cost and volumes of the business on how it
relates to the breakeven point. In order to do findings that are regarding the manner in which cost
and volumes are done in an organization, there are a number of assumptions that will be used in
these findings (Vogel, 2016). The major assumptions are variable, the units are all sold, and sales
assumptions while some costs such as fixed costs remain constant. Travel and tourism analysis
helps in financial planning and financial control for Carnival Corporation & plc:
 Carnival Corporation & plc plans its future needs in prior and makes the analysis of their
plans in order to keep good records. Doing prior planning will help in facilitating
decision making in an organization in order to avoid confusion in the future.
 The tool is effective since it will guide in a breakeven determination that will help the
organization to work out their profit gain and to avoid losses in the Carnival Corporation
& plc.
 Travel and tourism companies are also aiming for a better performance just like other
organizations and therefore they have to put in place other costs such as variable costs,
fixed costs together with costs such as sales, volume, cost and all the relevant financial
data that will contribute for the growth of the business.
The method mentioned above is simple to use because all data applied can be analyzed by using
the formula to derive an answer. No extra efforts will be required n the use of this method hence
it is the better tool for use.

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1.2 Analyze pricing method used in the travel and tourism sector
Due to changing the word, business activities are growing highly of which traveling and tourism
industry is not left out. People are exploring different parts of the world, and the booking of the
traveling means has changed whereby internet system booking is mostly applied. The tourism
industry is an important industry for many nations since there is good revenue collected and that
revenue helps in the development of those nations. In order to build the industry of travel and
tourism, a good decision will be needed so that the business can expand such that those nations
which have invested in tourism sector such as the UK can earn more profit (Bilgin, 2015).
Marketing principles are key important in an adoption of pricing in the tourism industry since
business decisions will factor in the business location, ratings of the business and the brandings
of the particular business. In doing business, Carnival Corporation & plc have an intention of
making profits and therefore pricing method is important because it will cover the cost of doing
business and the profit that is expected to be earned in the business. In order to get the selling
prices which can make tourism organization to earn profits, the profit margin should be added on
the cost of doing business so that the amount earned as profit can help in the future expansion of
the business. There are different pricing methods that can be applied in the travel and tourism
sector in order to earn the profit for an organization.
Market-led price- Pricing for goods and services will be determined by penetration and
skimming pricing. In penetration pricing, an organization will set their prices slightly lower than
the prices of their competitors so that customers can be influenced by the cheap price.
Penetration pricing is used to fight for the place in the market where competition is stiff.
Skimming pricing is a situation where an organization sets higher prices of their goods and
services because they have more advantages into the market than their rivals and therefore
customers will still buy from them and not the other organizations.
Profit led pricing- In this pricing method, there are two types: one is competitive pricing and the
other one is customer based pricing. Competition pricing is whereby the prices of the goods and
services are set depending on how the competitors have set their prices while customer based
prices is a situation whereby an organization or travel and tourism industry will set their prices

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while the factor in the will of customers to buy at that particular prices. So the prices are set in
relation to customer demand for goods and services of a particular tour and travel industry
(Buhalis, et. al., 2012).
Return on the investment pricing- In this case, pricing will be determined based on the interest
rates and returns on the investments. The amounts that are earned on the investments and the
interest rates will determine the pricing of an organization.
Cost led pricing- The prices of the goods and services will be controlled by the cost and
volumes of an organization or business entities. Business will calculate the breakeven point in
order to determine the profit earned.
Business organizations earn more profits that enable them to grow towards their goals and
objectives if they calculate their pricing method well. Business can earn good profits if they keep
in mind the factors that affect business profits such as volume, costs, margin and breakeven
point. They will determine the success or the failure of the business opportunity.

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1.3 Analyze factors influencing profit in travel and tourism sector
Proper management of travel and tourism business strategy will enable the business to earn more
profit that can help in business growth. Carnival Corporation has got their good planning in a
proper manner that can be implemented to accelerate the profit earning of an organization.
Tourism business can travel to far end nations and nearby nations doing advertisements and
promotions regarding the qualities of the services that they offer. Proper advertisement and
promotion will ensure that business has achieved well in profit earning that can help the business
to expand into various areas (Eurasia Business and Economics Society, 2015). The tourism
business expenses need to be determined because chances are there that high transport cost then
margin profit will go down. Carnival offers a better accommodation facility because tourists do
spend days while they go for the tour and that helps in earning more profit for the business.
Carnival trip evaluation- accommodation and airplane cost in carnival hotel is 60000 dollars, in
that amount, 150 dollars is charged for the meals and treated as the variable cost. If 90 tourists
have visited carnival hotel then the total variable cost will be 150*90 which 13500 dollars are.
Now the total cost will be variable cost plus fixed cost which amounts to 73500 dollars.
Business charges are 800 dollars for a tourist which sums up to 72500 dollars. That shows a
1500 dollars lost by the business. In order to earn 10000 dollars for the business, it will charge
927.77 dollars for each head. That will be profitable pricing.

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Task2
2.1 Explain different types of management accounting information that could be
used in travel and tourism business
Management accounting in business activities helps in keeping the business accounting records
so that any problem that arises in the business can be easily solved out. This accounting
management is important in the business because it keeps the business records updates in order
to avoid losses can easily occur in the business fraternity. Here are examples of the management
accounting that are used in Dalata Hotel Group in the UK.
Budget report- the estimated budget that will be incurred in the future is recorded in the budget
report. The budget report will then facilitate planning for Dalata hotel group effectively.
Job cost report- areas of the business that earns the profit are focused on so that the business will
operate without wasting time on none profitable activities/ projects. The aspects through which

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the organization can make profits are analyzed in order to make changes that increase the profit
of an organization.
Cost allocation report- the business does the allocation for every resource that is available at the
early stages of the business setups so that in the future there would be no ambiguous situations
that can be detected (Vogel, 2016).This will give management an opportunity to work on the
operating system of the business and keep their records in order to avoid any negative outcome.
In context with the Delta Hotel Group, the business had a plan to earn 10000 dollars from the trip
to Newcastle city but the planned budget and the actual amount used was so different as if the
business charged 800 dollars for each tourist then it would suffer a loss of 1500 dollars that was
counted as a loss. An evaluation that was done found it that the management of the company was
so poor to an extent that the company had to replace. In that case, Dalata hotel had to review
their techniques so that they can reinforce accounting management for an organization.

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2.2 Assess the use of management accounting information as a decision- making the
tool
Here are various different management accounting techniques that are used in accounting
decision making. These accounting techniques are used by large farms and small firms. Among
these techniques are:
Payback period- this method is used by the small business organizations to calculate cash flows
in an organization. it shows the time with which Dalata hotel group will be able to pay back the
amount that was invested in the company. Dalata should invest in areas that help the company to
earn more from their investments such as accommodation, tour etc.
Discounted cash flow- this is a discounting rate under which the company will receive the return
from the future value in the present scenario (Karasavvoglou, et. al., 2018). Travel and tourism
companies can make wrong decisions a time in their management accounting and therefore it is
important for the organizations to use best methods to reduce the losses to the full extent.
Accounting rate of return- when the company has invested some capital in the business, it
expects to earn more than invested. The different amounts of money that were invested and the
amount that was earned is the return. Dalata Hotel Group estimated to earn 10000 dollars but
looking at things, the business would incur the loss of 1500 dollars. For an organization to
control such losses, the best techniques should be involved.
Investment risk and sensitivity analysis- every business opportunity that is about to be taken by
Dalata hotel have got various types of risks that are likely to occur. In order to avoid such risks,
the company has a role to find a better ways of dealing with such risk.

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Task3
3.1 Interpret travel and tourism financial accounts
Dalata hotel group is one of the best world tour and travel company in the UK and in the world.
The company is situated in the UK with various branches in all many parts of the world. Dalanta
is perceived to have been listed in London security exchange (Informatio, U.S.A. & Information
Resources Management Association 2015). the company has got many tour operators. Here is
some of the financial interpretation of the company for the year ended 2017.
Ratio analysis for Dalata Hotel Group
Profitability ratio- the ability of the firm to earn the profit based on the amount of capital
invested in the business. They are different types of ratio that’s how the ability of the firm to
earn the amount invested. Others are returning on equity, gross profit ratio, a rate of return, net
profit ratio etc. they determine organizational profitability.
Return on equity- the return earned from shareholder’s equity. This ratio is important because it
shows the value of the company in the long run of the enterprise (Huggett, C., & Pownall, D.

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(2010). If there is an increase as compared to the previous year then that is a growth by the
company.
Return on assets- this shows the profit that company earns from its assets. The two comparisons
above show that the Dalata made an improvement from the amount earned from its assets.
Liquidity ratio- these are current ratios and quick ratios. The two ratios are used to show how firs
the company can have funded in its possession. It also shows the ability of the firm to pay back
debtors.
Current ratio- we can get it by dividing current assets by current liability and it is used to show if
the firm is in position to pay back its debts. It is a way of showing company’s aspect. The
decrease in the current show is an indication that the firm is not able to pay back its debts and
that is so dangerous for the company.
Quick ratio- shows how the firm can pay its debts on time without any difficulties experienced
by the firm. Ina case where this ratio is low then the firm is not able to meet its short-term
obligations and that is so dangerous to the firm. If the quick ratio is performing high then it
shows the good move by the company because the company will be able to clear short-term
obligations.
Investment ratio- if the company can earn the profit and ensure that the profit earned is used for
taking another project that is viable and is profitable for the organization. These ratios are
earning per share, price to sales ratio, debt to equity ratio, earning per share and they help to
analyze the viability of an investment.
Earning per ratio- this ratio shows what the company can earn based on the outstanding shares.
The amount of share that the company has will show how much earning the company can
achieve. Earning per ratio is then used by the investors and the organizational management of a
company to make decisions. If the company's earnings per ratio are up then the company is better
off. Therefore, the role of the Dalata hotel is to put more efforts in order to increase earnings
yearly as a sign of growth by the organization.

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Equity ratio- this ratio compares the proportion of the funds that have been invested by the
company and the amount of capital that are credit (Guliani & Rizwan, 2016). The organization
such as Dalata hotel which is working in travel and tourism sector is oblique to maintain
optimum equity ratio in order to invest and keep liabilities of long-running of the business
enterprise. If the equity ratio has decreased like the one shown above, then it shows something is
not right and the organization must make an amendment in some of the organizational policies to
build a good future of the company.

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Task 4
4.1 Analyze the sources and distribution of funding for the development of capital
projects associated with tourism

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Dalata incurred some of the lost on the
trip to Newcastle town. That came due
to poor management of the company in
terms of the accounting system. The
company at the moment is thinking of
investing in building a new hotel in
Newcastle town that would need fund
and therefore the company will need to
look help from various different areas.
There are various places where the
company can source for funds:
LOAN- These are various sources of
funds that can be obtained from various
sources that are external from the firm
and these firms needs collateral in order
to release funds for organizations.
Collateral will serve as a security when
the company is paid loans for
developing another tour hotel at
Newcastle city. Dalata or any other tour
and travel company would want to pay
fixed rates to obtain loans. There are
various types of loan such short-term
loans and long-term loans. Short term
loans are the loans that are taken for a
shorter period of time to finance short-
term operations and activities of an
organization. An example of short-term
loan is the bank overdraft. There are
also loans that are taken by
organizations and repayment can be
done after a very long period of time
(Eurasia Business and Economics
Society, & In Bilgin, 2015). Such loans
are referred to us long-term loans.
Long-term loans are taken by the
organizations whose aim is to acquire
an asset or to start a new project.
Retained earnings- Company can
decide to retain some of the profit
earned for the purpose of growth and
development of an organization. Such
cash helps in emergency cases or
contingency.
Equity- an organization can decide to
use the shared capital of an
organization so that the business funds
can be increased. This method of
getting fund can take time but it is the
best way in which an organization can
get money for funding its projects. The
company has got many options under
this method of fund collection since the
fund can come from different sources.
Business can use capital stretch method
of retaining funds for future
investments. This method takes a very
long time period and the funds are
increased and used purposefully for
investments only. The method is easy
and simple as compared to other means
of funding organizational projects. It
only consists ofthe bill of exchange

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and other receipts that are related to
creditors of the business that is in place.
Ones an organization has sourced for
the funds, and then the distribution of
these funds follows other steps in an
organization. If Dalata has a budgeted
for 25 million dollars then the company
would decide to loan for 10 million
dollars from the bank by paying an
interest monthly after issuing the bank
with collateral security. The company
could have retained 4 million dollars
from the previous year's earning and
that can be added as another source of
capital. Maybe the company had
another source of capital stretch which
is around 2 million dollars. The
company may decide to go for short-
term loan of around 4 million dollars to
save the company as a bridge loan. And
finally the share capital can be around 5
million dollars. The capital budget of
the company is a vital thing that needs
a special treatment by the company
organizers because poor capital mix
can lead to the closure of the business.

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Conclusion
Many countries have invested in travel and tourism in their various economies. The sector helps
in generating income for organizations and enhancing the physical appearance of those nations.
In regards to building the natural phenomena of the country, there is funding that is associated
with the move. These funding need accuracy so that an organization can know the direction it
takes with its business activities. Proper and accurate funding build the travel and tourism sector
in the UK and other parts of the world (Buhalis, D., Darcy, S., Ambrose, I., & Dawsonera.
(2012). Carnival directors were planning to visit Newcastle city for a period of half a year but it
was discovered that financial planning of an organization was not right. That lead to the revenue
loses of the company. The company then pleaded to make few changes in order to have a good
financial management and financial plans together with good accounting techniques. The
company was also willing to have a good investment appraisal technique that would see an
organization meeting its goals in relation to a better growth and correct decision making for the
betterment of the company. Dalata Hotel Company being the good one in travel and tourism
sector were also agitating for changes can make them become the best in the market and they
expand more than it is currently. The companies who have an objective of sourcing funds from
various places need to look at it keenly because some sources are expensive for an organization.

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