Finance and Funding in the Travel and Tourism Sector: A Comprehensive Analysis

This report delves into the crucial aspects of finance and funding within the travel and tourism sector. Using real-world case studies of Carnival Corporation & plc and Dalata Hotel Group plc, it explores the importance of cost and volume management, pricing strategies, and the impact of various factors on profitability. The report also examines different types of management accounting information and their application in decision-making. Furthermore, it analyzes the sources and distribution of funding for capital projects related to tourism, highlighting the role of public and private investment in key projects like theme parks, railway infrastructure, and historical monuments.

Finance and Funding in the Travel and
Tourism

Contents
Introduction:...............................................................................................................................3
LO1............................................................................................................................................4
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.............................4
P1.2 Analyse pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc....................5
P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study..............................................................6
LO2............................................................................................................................................7
2.1 Explain different types of management accounting information.....................................7
LO3........................................................................................................................................9
3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2017 showing at least two years performance (for example comparing 2017 to
2016)......................................................................................................................................9
LO4..........................................................................................................................................11
4.1 Sources and distribution of funding for the development of capital projects related to
tourism..................................................................................................................................11
Conclusion:..............................................................................................................................12
References:...............................................................................................................................13

Introduction:
The report is prepared so that the learners can understand the knowledge, techniques of
management accounting and skills which helps in taking the decision process. In travel and
tourism sector it is important to understand the factors which influence the profit and
different methods which analyse the price. It also explains the cost and volume which helps
in the financial management of the business. Different types of management accounting are
explained with the help of the poster and different tools are used for decision making in the
company Dalata Group. Ratios will be calculated for the company Dalata which shows the
financial position of the company whether their cash, debt, profit, etc. has increased or
decreased from the previous year. Sources of funding and capital projects will be explained
so that the trainers can understand the needs of capital and funds.

LO1.
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.
Carnival Corporation & plc: This Company has the biggest travel company in the world
and it has many cruise brands in North America, Australia and Europe. The Company has 10
global cruises brands in North America, UK and German. As a supervisor of the Company
which is situated in the London, England it is important to understand the cost and volume in
the travel sector.
Cost: The cost is the most essential factor of the business as it manages the financial accounts
of the company (Kozak, 2013). Cost helps in taking the decision as it provides the financial
structure to the business and also gives maximum return on investment. Cost helps in
comparing the financial ability so it also improves the performance management of the
company.
Direct cost and indirect cost: The direct cost is traced to the specific cost objects and it is
compiled with the company such as services, customer, project, etc. It is the cost of the
producing goods and services and it is reported when services to the tourist are provided.
Indirect cost is also known as an overhead cost that always remains same no matter whether
the tourist comes to visit the place or not (Shenkar, et. al., 2014). Direct cost includes direct
material; labour, etc. whether the indirect cost includes the electricity, maintenance expense,
etc.
Fixed cost and variable cost: Fixed cost is the cost of the company which remains same it
doesn’t change as the volume increases. Variable costs are those which changes when the
volume of output changes and it may be increased or decrease with the volume of output.
Doesn’t matter what the sale is in the company the fixed cost remains same in the company
such as rent, equipment, etc. Variable cost includes such as electricity, stock, wages, etc.
(Kozak, 2013).
Volume: Volume helps in analysing the economies of scale. It helps in taking the better
decisions of the company Carnival Corporation & plc and also fixes the prices and forecast
the uncertain future events.

Breakeven point: It is very important for this sector company as it helps in evaluating the
cost which has spent on the expenses. It covers the total cost and represents the sales value in
quantity. It is important to analyse as it covers the cost period in travel and tourism sector.
Economies of scale: When the total output increases the cost per unit decreases. It is the
saving in the cost when the total production or services increases. The company Carnival
Corporation & plc can save the cost by using these economies of scale (Shenkar, et. al.,
2014).
Diseconomies of scale: The cost per unit increases when there is an increase in the size of the
company or output. It is done in the company to know how the business is working and the
volume can be analysed.
P1.2 Analyse pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc.
Travel and tourism are rapidly increasing their business in this factor and they are generating
more income and also support the economy. So the cruise brands of the company Carnival
Corporation & plc is adopting the different pricing method.
Cost led method: It is the method of pricing which gives the information regarding the sales
in comprising to other metrics. This method of pricing is used when the competition is
increasing in the market.
Market-led method: The price is set according to the market conditions and the price is
established between the company and the customers. In this, the company accepts the price
which is charged by the competitors at the same level (Shcherbakov and Larsson, 2016).
Return on return method: This method is used by the market leaders or the by the
companies who are trained in the travel and tourism sector. This method is used when the
demand increases then the company will reduce the average total cost and will increase its
margin of profit (Shenkar, et. al., 2014).
Marginal costing: Marginal costing is the costing which is used by the companies to
determine the price; it includes the fixed cost and the variable cost. Variable cost is known as
the product cost while the fixed cost is known as the period cost. It is calculated by using
profit volume ratio. It determines the cost of the next unit.

Absorption costing: It considered both the cost and also includes the production, distribution
and selling & administration. In this method, profit gets increased as fixed cost is included in
the product cost. It also determines the cost of each unit.
P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study.
Profit is the revenue and the financial gain of the company Carnival Corporation & plc. Profit
is the surplus which remains after deducting the total cost incurred and the expenses. Profit is
increased by the company when they understand their ideal customers and build a
relationship with the influencers. The factors which influence the profit of the company
Carnival Corporation & plc are stated below:
Political environment: The profit of the company Carnival Corporation & plc is also
affected by the rules and regulations of the government and also some legal obligations
(Shcherbakov and Larsson, 2016). Some of the factors which influence political environment
are the policy of taxation, regulations of foreign trade, etc.
Social environment: The Company also affected by the social factors which influence the
profit such as changing lifestyle, change in the population, distribution of income, etc.
Economic environment: The Company’s profit is also affected by the economic factors such
as a change in the interest rate or the exchange rate and also affects other monetary factors of
the company.
Current trends: Trends are things which are following by the people currently on a very
large scale. People like to visit those places which are trendy nowadays so that the number of
people attracted towards the trendy place and profit for the company increases.
Bad debts: It is the amount which has not been received by the company till yet. This
amount reduces the profit of the company Carnival Corporation & plc. The amount of bad
debt is shown in the P$L account.
Seasonal variation: Season is the important factor for the business in sector travel and
tourism. As the company will increase the profit only in seasonal variations such as summer
vacations because at that time mostly tourist like to visit new places (Shcherbakov and
Larsson, 2016).

Planning: If the company plans some new events or apply some offers then the tourist
attracted and the profit of the company can be increased. Planning is also an essential factor
to increase the profit planning is a must (Shcherbakov and Larsson, 2016).
LO2.
P2.1 Explain different types of management accounting information.
P2.2 Assess the use of management accounting information as a decision-making tool
for Dalata Hotel Group plc
Slide 1: Title

Slide 2: Table of content

Slide 3: Introduction

Slide 4: Different types of management accounting are explained which are used in the
company and they are helpful in taking the decisions.

Slide 5: Budget is the plan for the future. It is the estimation or the prediction regarding the
uncertain future events.

Slide 6: MIS is the computerise data system which maintains the data of the company and
keep all the records. It is the tool which helps in taking the decisions and also evaluates the
performance.

Slide 7: It is the prediction or the estimation for the future. Future is uncertain so plan for the
future events is necessary.

Slide 8: It is the most important tool of the company as it gives the information regarding the
financial position of the company.

Slide 9: Dalata hotel group is one of the biggest companies in travel and tourism sector and it
also serves the best hospitality.

Slide 10: Company uses different tools which helps in taking the decision regarding the
financial budget and also helps in improving the performance of the company.

Slide 11: Conclusion

Slide 12: Reference



LO3.
P3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2017 showing at least two years of performance (for example comparing 2017
to 2016).
Ratio analysis of the year 2016 and 2017 are stated below:

Dalata hotel group is one of the largest companies and it serves the best hospitality. The aim
of this company is to earn the maximum profit and to serve the customers at its best. The
company wants to interrupt the financial accounts so that the financial position can be
analysed and the comparison of the two years data has done so that the performance of the
company can be analysed. The ratios are determined so that the growth of the company
Dalata hotel group can be ascertained.
 Quick ratio and a current ratio of the company is calculated to know the potential of
the company whether they can meet the monetary liabilities and capable of dealing
with the obligations of the company for the short term. The current ratio of the
company for the year 2016 is 1.44 and for the year 2017 is 0.66. The quick ratio of the
company in the year 2016 is 1.41 and in the year 2017 is 0.44.
 Gross profit ratio and net profit ratio is calculated in the company Dalata hotel group
to know the profit of the company. The net profit of the company has increased from
the previous year. In the year 2016 the net profit is 12.02 and in the year 2017, the net
profit of the company is 19.60 (Dalata Hotel Group, 2017). The company’s gross
profit has also increased from the previous year 2016 by 1 percentage. In the year
2016 the gross profit is 62.19 and in the year 2017, the gross profit is 63.19.
 Total assets of the company have also increased from the previous year that means the
company has the stability to meet the creditors or to pay the equities on time. The
return on capital employed and the capital gearing ratio has also increased from the
previous year (Dalata Hotel Group, 2017).
 The cash flow of the company includes the three activities operating, investing and
financing. Operating activities has increased from the previous year. In the year 2016,
the amount is 77813 which have increased in the year 2017 with the amount of 95207.
The investing activities of the company have decreased from the previous year. It
means the company has done many transactions in purchasing and sealing the
equipment. The financing activity has also decreased from the previous year.
 The income statement and the balance sheet of the company are showing the financial
position of the company which has improved from the previous year. The profit and
the earning per share of the company have increased. The equity has been reduced as
a comparison to the previous year (Dalata Hotel Group, 2017).

LO4.
P4.1 Sources and distribution of funding for the development of capital projects related
to tourism.
Different capital projects are explained in this leaflet so that their sources of funds can be
analysed. Capital projects such as small-scale tourism, railway projects, etc. are explained so
that the funds which can be public and non-public such as debt-equity, government, etc. can
be analysed (Zahra and Mcgehee, 2013). These projects require the huge investment as they
are the largely structured and also require well maintaining as many tourists are attracted
towards these places. The capital projects are established in the UK and they are serving the
economy and also help in the growth of this sector. All these projects need capital funds as
they are the pride of the nation and also attract the tourist to visit the place.

Theme parks: In this capital project huge investment is needed for the built-in themes of the
projects. For the growth of the business and for the large scale the funds are obtained from
the government. The government likes to invest in these funds as they are the entertainment
source for the public (Throsby, 2016).
Railway department: To maintain the projects like railway department is very important as
they are the first attraction point for the tourist (Throsby, 2016). Railways are the
transportation source so the funds needed for maintaining and properly established is taken
from the government as they are main authority for this.
Historical monuments: This project requires a huge investment to maintain the historic
structures and monuments is not an easy task. This kind of projects needs to maintain as the
old things require the protectiveness from the damage. Historical things should be maintained
as they are the history of the country so that require funding from the public sector (Zahra
and Mcgehee, 2013).

Conclusion:
In this report, it is explained that different cost such as fixed cost, variable cost, the direct and
indirect cost is evaluated for the company Carnival Corporation & plc. Different volumes and
scale of economies are analysed and the price is determined by different methods such as cost
led method, market-led method, absorption and marginal which helps in taking the decisions.
Different factors are explained which influence the profit like market fluctuations, different
environment, bad debts, etc. Different management accounting tool is explained which helps
in knowing the financial position of the company and the different tools which helps in taking
the decision in the company Dalata hotel group is explained. The report also includes the
comparison of ratios with the previous year so that the performance of the company can be
determined. Different capital projects and their sources of funds are explained whether they
are taken from the public, private or government. All this report helps the new learners to
attain some knowledge, skills and techniques of management accounting, costing and how to
evaluate the ratios so that the financial position of the company can find out.

References:
 Dalata Hotel Group, 2017. Dalata Hotel Group [Online]. Annual report. Available at:
http://dalatahotelgroup.com/wpcontent/uploads/2018/04/FinalDalata_AR17_spreads.p
df [Accessed: 19 June 2018]
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