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

This report delves into the financial management aspects of the travel and tourism sector, focusing on cost-volume-profit (CVP) analysis, pricing strategies, and the role of management accounting information. Using Carnival Corporation & plc. and Dalata Hotel Group plc. as case studies, the report examines the importance of costs and volume, analyzes pricing methods, and assesses the impact of various factors on profitability. Additionally, it interprets financial accounts of Dalata Hotel Group plc. for two years, highlighting key ratios and their implications. Finally, the report explores sources and distribution of funding for capital projects in the tourism sector, providing insights into the financial landscape of this dynamic industry.

Finance and Funding in the Travel and
Tourism Sector
1

Table of Contents
Introduction:....................................................................................................................................3
Task 1...............................................................................................................................................4
P1.1 explains 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.......................................8
P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc. Cruise brands as your case study..................................................................9
Task 2.............................................................................................................................................11
P2.1 explains different types of management accounting information that could be used in
travel and tourism businesses using Dalata Hotel Group plc. as your case study.....................11
P2.2 assesses the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc..............................................................................................................11
Task3..............................................................................................................................................13
3.1 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)........13
Task 4.............................................................................................................................................17
4.1 analyze sources and distribution of funding for the development of capital projects
associated with tourism..............................................................................................................17
Conclusion:....................................................................................................................................19
References......................................................................................................................................20
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Introduction:
In the global economy the scope for travel and tourism is increasing and due to that, there is the
need have the proper financial management. The aspects which are related to cost and profit will
be discussed in the report below and for that, CVP analysis will be carried. The next part of the
assignment will be covering all the management accounting information and the manner in
which they will be used for the benefit of the company. For that, a poster will be created which
will be describing all of these aspects. There will be ratios analysis in the third part of the report
for which the calculations for Dalata group will be made and also the proper interpretation will
be made. There will be consideration of the capital projects which are to be undertaken and the
sources which are to be used in that respect. This will be presented in an appropriate manner with
the help of leaflets.
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Task 1
Report:
Introduction:
The below-presented report will be containing the CVP analysis and for that, all the elements of
it will be considered. There will be the identification of the methods used for the setting of the
price and also the factors will be determined which affect the profitability of the business.
P1.1 explains the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation &plc. as your case study
The funds will be required to be maintained and for that, all of the aspects which are related to it
will be discussed in the part below:
Cost: The Company is required to identify all the expenses which have been incurred in the
business and for that there will be a determination of all the elements which are involved in this.
All of the parts which are to be involved in the calculation of total cost will be considered in this.
There are two types of costs which are a direct cost that will be related to the product and
services which are provided and are directly related to it (Garvey, et. al., 2016). Another is the
indirect cost in which the cost is not related indirect manner but is required to be incurred for the
completion of the process. There will be a variable aspect of them which will be changing with
them in the company with the fluctuation of the total units. Also, the fixed cost will be included
by the carnival which is incurred and remains the same in all the period. The amount which is
charged for the food and accommodation by the company will be considered as the variable and
that of the fuel and other administrative charges will be fixed.
Total cost = Total Fixed cost + (Variable cost per unit * Number of units)
Volume: In a business, there is the specific limit at which production is made and that is
considered as the volume. This will be the units which are sold by the company and by that
revenue will also be ascertained. This will be considering the price which is charged in this
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respect. The total number of the tourist which is there with the company will be considered as the
volume and buy that revenue will be identified.
Revenue/Volume = Sales price per visitor * Number of visitors
In the below-presented table, the total volume for the past few years has been represented and
also the revenue which is made with the help of that. It can be seen that there is the continuous
increase in this number and this shows that the company is maintaining its position in a proper
manner and providing the customers with proper quality services.
Profits: The Company is required to manage the activities in such a manner that the profitability
is maintained in the best possible manner. This is the amount which will be left after considering
all the expenses from the income which is made. There is the need to maximize this so that long-
term success is maintained and for that proper decisions and actions will have to be taken (Scott,
2017). For the identification of this, there is the need to prepare the income statement and the
same for Carnival Corporation is presented below for the better understanding. The profit is
$2606 for the current financial year.
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All of the elements which are explained above include some interrelation and that will be
identified with the help of CVP analysis so that proper interpretation is made and that will be
helping in the making of the required decisions.
6

The relation which is present among the volume, cost, and profit can be understood with the help
of the graph that is presented above. It can be seen that with the rise in the volume there will be a
rise in the variable cost of the company. It can be noted that when the sales are higher than the
cost then the profit is made and in case of more cost the loss is faced by the company (Nas,
2016). The relationships which are there among them are identified by the help of the CVP
analysis which is carried out.
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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.
The prices in the company will be set by the use of various approaches and they are as follows:
Competition based pricing: In the competitive market this strategy which will be used for the
setting of the price. In this, the company will be considering all the factors which are related to
the competition and then the price by which the gain above the other competitors can be gained
will be set by Carnival Corporation.
Demand-based pricing: The demand in the travel market keeps on changing depending on
various aspects and they will be used to calculate the best price (De Toni, et. al., 2017). In that, if
the carnival will be having more demand than the price will also be high and vice versa.
Value-based pricing: Carnival will be using this tool so that price of several packages is
decided and in that the quality of the service will be considered. There will be more amounts
which will be charged for the suites and ocean view rooms as they provide best facilities. In the
case of the dock rooms, there will be a low price.
Cost-based pricing: The total cost which will be calculated with the help of all the amounts that
are incurred will be used in this method (Nagle and Müller, 2017). There will be an addition
which will be made to that as the profit of the company and by that final price will be
determined.
Rival’s pricing: The business will be made successful in the long run when it will be able to deal
with the competitors in the market. For that, all the policies and strategies which are used by
them will be analyzed and considered while setting the price. By that, all of the aspects of them
will be covered and business will be able to deal with them in the market.
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P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc. Cruise brands as your case study.
In the company, the main aim is the maintenance of profits and for that, it is required that all the
factors which affect them shall be evaluated in a proper manner. They are being identified and
explained below:
External factors:
Economic Factors: The profitability of the company will be affected by the trends and the
situations which are there in the market. In that, the economic position is also considered
(Bamiatzi, et. al., 2016). There will be a decline in the profits of the business in case of the
recession in the market and the situation will be reversed in a boom period with high profits.
Political factors: The political aspects in the environment will have to be considered and so it is
required that they are identified as they affect the profits of the business. There are several rules
and regulations which are present in the business and shall be followed in a persistent manner.
Carnival will also be required to comply with the laws which are specified in respect of the tax-
related matters.
Environmental factors: The travel business is greatly affected by the weather conditions and it
is required that they shall be properly analyzed. Carnival will be able to have higher profits in the
favorable seasons at that time there will be a number of visitors who will be using the services.
Internal factors:
Staff efficiency: The retention of the visitors will be made with the help of the provision of best
quality services to them. In that, it will be required that staff is properly trained and efficient so
that they can understand the needs of the consumers and the deal with the situation accordingly
(Moaveni, 2014). With that, the profits will be raised and this will be beneficial for Carnival.
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Debts: The debts will also be affecting the profits as they will be increasing the cost of the
company with the interest that is to be paid to them. For that, it will be required by Carnival that
proper amount of the debt shall be managed so that adverse impact is not faced due to that.
Cost of Services: The profits are highly dependent on the cost of the company and this has also
been ascertained by the help of the analysis which has been carried (Ansari and Riasi, 2016).
There is the inverse relation and according to that if the cost will be more than in such case there
will be a decline which will be faced in the profits of Carnival.
Conclusion:
With the help of the report CVP analysis has been carrying out and in that understanding of all
the elements has been gained. The strategies are also identified for price fixation and the impact
on profits is evaluated.
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Task 2
P2.1 explains different types of management accounting information that could be used in
travel and tourism businesses using Dalata Hotel Group plc. as your case study
P2.2 assesses the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc.
Poster:
In the company, there are various types of management accounting information which will be
used and they are all identified by the help of poster. In this, budgets, financial statements,
variance analysis and MIS are included. By the help of them, it will be possible for the
management to use it in the various manner by which advantages will be received (Otley, 2016).
There will be making decisions with the help of this and all other activities will be performed.
The trend will be analyzed with the help of that and cost of the company in the whole process
will be controlled in the most effective manner. The performance will be measured and the price
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will be reduced as there will be a making of proper decisions (Ismail and King, 2014). The
investment will also be made in the best option available.
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Task3
3.1 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).
Report:
Introduction:
The below-presented report will be presenting the ratio analysis in respect of Dalata group. In
that calculations will be presented and with that proper interpretations will be made.
Content:
The Dalata group will be using the information from the financial statements so that proper
performance evaluation will be made and in that ratios will be used as the measuring tool. This is
broadly used as various aspects are covered in this and with the help of that position of the
business is determined (Goyal, 2016).
Calculation of Ratios:
Particulars 2017 (€'000) 2016 (€'000)
Current
Assets
38214 98771
Quick assets 36449 96954
Current
liabilities
83410 68821
operating
profits
86923 55607
Net profits 68308 34923
Revenue 348474 290551
Debt 363695 364994
Equity 737393 620382
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Particulars Formula Calculations 2016 2017
Current
ratio
Current assets/current
liabilities
98771/68821 1.44 0.46
Quick ratio Quick assets/Current
liabilities
96954/68821 1.41 0.44
Operating
margin
Operating
profits/sales*100
55607/290551*10
0
19% 25%
Net profit
margin
Net profits/Sales*100 34923/290551*10
0
12% 20%
Debt-equity Debt/equity 364994/620382 0.59 0.49
Current ratio: The ability of the company to meet its obligation will be ascertained with the
help of this ratio as in this all of the current assets which are available for the meeting of
liabilities will be analyzed. In the given case it is ascertained that there is a decline in this from
1.44 to 0.46 in the one year and so this is not in favor of the company (Dalata Hotel Group Plc,
2017).
Quick ratio: This will be considering all the quick assets and by this liquidity is analyzed. There
will be a comparison of quick assets and current liabilities in this and with the help of that the
company’s position to pay the liabilities immediately will be evaluated. This is also reducing
from 1.41 in 2016 to 0.44 in 2017 (Dalata Hotel Group Plc, 2016).
Operating margin: The operations are carried in the business and it is required that profit from
them shall be evaluated and for that this ratio is calculated in which the operating profit is
compared with the total revenue. This is experiencing the growth from 19 to 25 percent and that
means there is effectiveness in the company.
Net profit margin ratio: The profit which is being earned by the company in the net amount is
considered under this and for that net profit is identified. By this, the final profitability is
analyzed and that is increasing in the current situation which is from 12% to 20%.
Debt to Equity ratio: The amount of the equity and debt in the company shall be managed in an
appropriate manner and for that, it is required that proper evaluation of the capital structure shall
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be made. This shall be such that no excessive cost will be incurred. This is reduced in Dalata
from 0.59 to 0.49 (Dalata Hotel Group Plc, 2017).
The position of the business will also be evaluated with the help of the cash position and so all of
the items in the cash flow statement shall be analyzed.
The company is making the proper cash flow statement and from that, it can be ascertained that
there is the undertaking of various activities in the operating part. By the use of them the
company is having the positive balance in this section. In the remaining sections which are
investing and financing activities there is the negative flow of cash and the main reason for the
same is the purchase which has been made by the company in respect of the plant and also the
repayment of the loan which has been taken is made which reduced the cash balance for the
current period.
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Conclusion:
In the Dalata the performance is evaluated and that all of the aspects are covered. The ratios are
identified in the above report and by that, it is identified that the company is maintaining proper
profitability.
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Task 4
4.1 analyze sources and distribution of funding for the development of capital projects
associated with tourism.
Leaflet:
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Interpretation:
The travel and tourism sector is required to be developed and for that, there is the need to
undertake various capital projects and all of them are identified. The heritage sites will be
developed and with that, the information points will be established so that issues are not faced by
visitors. Also, the infrastructure of the country is improved and themes are set to attract more
people (Pulman is, 2015). All of this will be requiring the funds and for that internal and external
sources will be sued which have been identified. The merits and demerits of them will be
considered before selecting the means which will be used for the arrangement of funds.
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Conclusion:
The report that is presented above elucidates the major costs and the profits aspects to be
considered and for that CVP analysis has been carried. There is the identification of the factors
affecting profitability and methods to be used for pricing. The main information and the uses of
that have been determined by the help of the poster and increased the understanding in this
respect. All of the ratios are calculated and also the cash position of the business is analyzed. For
that proper analysis is undertaken and with the help of that interpretations are made. There are
the leaflets which have been prepared and under them, the capital projects to be used in travel
and the manner in which funding of them will be done is identified.
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References
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success and effectiveness. International Business Research, 9(4), p.20.
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industry, and country effects on profitability under recessionary and expansion periods: A
multilevel analysis. Strategic management journal, 37(7), pp.1448-1471.
 Dalata Hotel Group Plc, 2016. Annual Report. Dalata Hotel Group Plc, 112-116. [Online]
Available At Http://Dalatahotelgroup.Com/Wp-Content/Uploads/2017/03/170330-Annual-
Report.Pdf [Accessed: 25 July 2018]
 Dalata Hotel Group Plc, 2017. Annual Report. Dalata Hotel Group Plc, 102-110. [Online]
Available At http://dalatahotelgroup.com/wp-content/uploads/2018/04/Final-
Dalata_AR17_spreads.pdf [Accessed: 25 July 2018]
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Levels And Their Impact On Corporate Profitability. Revista De Administração (São
Paulo), 52(2), Pp.120-133.
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Uncertainty Analysis: A Systems Engineering Perspective. CRC Press.
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 Moaveni, G., 2014. Determinants Of Profitability In Tourism Industry: Evidence From
Turkey (Doctoral Dissertation, Eastern Mediterranean University (Emu)-Doğu Akdeniz
Üniversitesi (Daü)).
 Nagle, T.T., and Müller, G., 2017. The strategy and tactics of pricing: A guide to growing
more profitably. Routledge.
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 Nas, T.F., 2016. Cost-Benefit Analysis: Theory And Application. Lexington Books.
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 Pulman is, E., 2015. Micro-Economical Aspects of Public Projects: Impact Factors for
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