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

Finance and funding in the travel and tourism sector
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Table of Contents
Introduction...................................................................................................................... 3
Task 1.............................................................................................................................. 4
1.1 Examine the concept of CVP analysis and explain its importance in the financial
management of a travel and tourism business such as ATC........................................4
1.2 Provide an analysis of pricing methods that ATC can use to determine the price to
charge each tourist on the trip. [M1].............................................................................6
1.3 Analyse the factors that will influence the profit ATC will earn on the holiday trip.
[D1]............................................................................................................................... 8
Task 2............................................................................................................................ 11
2.1 Explain the different types of management accounting information that could be
used in ATC................................................................................................................ 11
2.2 Assess the use of investment appraisal techniques as decision-making tools using
an example from ATC or other relevant company......................................................13
Task 3............................................................................................................................ 15
3.1 Download the main financial statements of any travel and tourism company and
interpret the financial statements using appropriate ratios for profitability, liquidity,
efficiency, and investment. [M3, D2, D3]....................................................................15
Task 4............................................................................................................................ 19
4.1 Analyse the sources of funding, both internal and external the company can
obtain in developing the new hotel..............................................................................19
Conclusion..................................................................................................................... 20
References.....................................................................................................................21
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Introduction
This unit of Finance and Funding in the Travel and Tourism Sector focuses on the
learners to gain the knowledge about the cost volume profit analysis. It also includes the
significance of cost volume profit (CVP) in the financial management of tourism and
travel association such as Akaglo Tours Company. This unit also includes the analysis
of various pricing methods which gets used in the Akaglo Tours Company for
determining the rates for charging to each and every traveler on the tour. Various
approaches to study for analysing an appropriate pricing method have also discussed in
the study in an attractive manner. Some of those factors which highly influence the
profitability of Akaglo Tours Company have also taken place herein. Calculation of profit
in organising a tour for around 90 tourists has also been included which greatly helps in
understanding the about the assumed profits and revenues.
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Task 1
1.1 Examine the concept of CVP analysis and explain its importance in the
financial management of a travel and tourism business such as ATC.
It is well known that the financial management is connected with the deployment and
arrangements of various kinds of funds which helps in the functioning of tourism and
travel business such as Akaglo Tours Company. The cost gets explained by the total of
various expenses or expenditures which get included in the business activities for
producing the services and good in an efficient manner. In order to meet the customers’
needs and requirements, it is importantly required to maintain the cost of the services
and products in an efficient manner. It helps in the better functioning of the business
activities and takes the business to the top. Various kind costs take place herein such
as fixed cost, direct cost, variable cost, indirect cost, and tec.
 Fixed cost is known as the one which gets paid for the activity which remains
unchanged for each and every activity related to the business. Depreciation, rent
amount is the example of it
 According to Boskov, et. al., (2016), the cost which actually gets paid for buying the
material, expenses labor is known as the direct cost.
 The cost which is basically getting include in some overhead such as property rent,
energy cost, cleaning cost is well known as Indirect Cost.
 The cost which gets increased with the increment of activity level like material cost,
wages and etc. get to include the Variable cost (Boskov, et. al., 2016).
There are so many techniques or analysis that gets included in the process of the
business for making appropriate decisions. Break-even analysis & cost volume profit
analysis are the most important and popular techniques which get used in the business
of Akaglo Tours Company. Cost volume profit analysis helps in increasing the efficiency
of the business in various ways.
Cost Volume Profit Analysis- According to Agba, et. al., (2017), this analysis gets
used in the business of Akaglo Tours Company for taking the effective decisions which
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are related with the profit & cost volume for the success of the business. This analysis
greatly helps the business in increasing the number of sales in an effective manner.
Increased number of sales helps in generating the desired amount of revenue and profit
efficiently. As same it also helps in reducing all those risk factors which are related to
the cost or profit in any manner (Agba, et. al., 2017).
According to Vanhove (2017), the cost volume profit analysis greatly contributes in
finding the actual cost and the analysis of the capabilities of Akaglo Tours Company in
producing the services and goods in the perfect time frame. There are so many benefits
of using the cost volume analysis of profit by the Akaglo Tours Company as it helps in
controlling the various activities of the business in an attractive manner. It also helps in
taking the better decisions for the success of the business. As same it plays a vital role
in fixing the actual prices of products and services and in forecasting as well (Vanhove,
2017).
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1.2 Provide an analysis of pricing methods that ATC can use to determine the
price to charge each tourist on the trip. [M1]
There are so many pricing methods which actually get used in the tourism and travel
business of Akaglo Tours. The pricing methods basically get used in for fixing the
prices of services and products which is getting purchased by the customers. It focuses
on that prices which are getting paid by the consumers so that the association can
attain the excellent level of profit. Some of the pricing methods which help the
businesses for setting the prices are well discussed below-
 Skimming Pricing Method- According to CIOCHINĂ (2017), the managers or leaders
of the market follows the skimming pricing method in the Akaglo Tours Company for
setting the higher prices of their services and products. By the help of setting the higher
prices, it gets easier for the association to recover all the incurred cost, as because the
higher profit includes an ample number of revenues and profits in the business. The
skimming pricing method greatly helps in recovering their actual cost in the shorter
period of time and takes the business on top with higher levels of profit in the
competitive market (CIOCHINĂ, 2017).
 Cost-plus pricing method- According to Boskov, et. al., (2016), the association of
travel and tourism uses this pricing method to set the prices by including the fixed cost
and variable cost of products and services. After adding the fixed & variable cost the
leaders of the association adds some more amount for increasing the level of profit by
selling them. By the use of cost-plus pricing method the managers and leaders of the
Akaglo Tours Company set the reasonable prices for their services and products so that
they can earn the adequate and perfect level of revenues and profits as well (Boskov,
et. al., 2016).
 Per Person Pricing Method- According to Agba, et. al., (2014), this method gets
followed by some of the new entrants for evaluating the current trend of the market.
After finding out the current trend they tend to set the prices of products and services
according to the situation so that they can facilitate the customers in an appropriate
manner. In this method, the associations make charges according to the number of
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