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

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).