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

This report delves into the financial aspects of the travel and tourism industry, examining cost and volume analysis, pricing methods, management accounting information, and funding sources. It analyzes the financial performance of Dalata Hotel Group Plc. and Carnival Corporation & Plc., highlighting key accounting tools and decision-making strategies for maximizing profitability. The study explores various funding sources, including retained earnings, loans, and equity investments, and discusses the importance of short-term loans for small-scale organizations.

FINANCE AND FUNDING IN THE TRAVEL AND TOURISM
SECTOR
1

Executive Summary
The study has been made on the basis of financial performance in the hospitality as well as the
business of tours and travels. The study has helped to derive the financial performance of Dalata
Hotel Group Plc. and the Carnival Corporation and Plc. In the conducted study, there has been
found the proper accounting tool for an organisation, which will help the management team of
the respective organisation to evaluate the profitability. This study has evaluated the process to
gain the maximum return on the total investment on the capital projects, which have been made
by the investors as well as the owners of the organisation. The appropriate decision-making tool
for the management of the concerned organisations has been determined from the conducted
study. There have been found the sources of the finding that can be distributed to the various
projects of the organisation. By implementing the technique of payback period accounting tool,
the relative organisation can easily derive higher profitability from the investment made on the
capital project. With the help of rate of accounting of earned return technique, difference
between the estimated return amount and the actual return amount on the total investment can be
derived. The small scale organisation can select short-term loans instead of long-term loans, to
avoid the negative impacts of investing in the capital projects. This is because short-term loan
there may be less of risks in the investment.
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Table of contents
Introduction......................................................................................................................................4
Aim..................................................................................................................................................4
Task 1 (LO1, AC1.1, 1.2, 1.3, M1, M2, M3, D1, D2, D3)..............................................................4
1.1 Importance of cost and volume in context to financial management of tourism and travel......4
1.2 Evaluation of pricing methods in context to travel and tourism..............................................5
1.3 Factors which influence profit in relation to travel and tourism business...............................7
Task2 (LO2, AC2.1, 2.2, M1, M2, M3, D1, D2, D3)......................................................................8
2.1 Various types of management accounting information.............................................................8
2.2 Assessment of the use of management accounting as a decision-making tool........................10
Task3 (LO3, AC3.1, M1, M2, M3, D1, D2, D3)...........................................................................12
3.1 Financial accounts of travel and tourism.................................................................................12
Task 4 (LO4, AC4.1, M1, M2, M3, D1, D2, D3)..........................................................................13
4.1 Sources and distribution of funding.........................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Introduction
This study revolves around the understanding of the gains, cost, and volume, management
accounting techniques in relation to the travel and tourism industry. This report deals with the
importance of volume and cost in accordance to the financial management of travel and tourism.
It sheds light on the evaluation and analysis the pricing methods for travel and tourism. The
factors which influence profit in the travel and tourism sector are catered in details. The types of
management accounting information are driven in this study. The uses of decision making
pertaining to the management are evaluated in this report. The interpretation of the travel and
tourism is grounded on the basis of financial stature. The analysis is pertained in this study in
context to the distribution of funding and sources in context to the development of the capital
projects in association with tourism. Cost is determined in the form of direct cost, fixed cost,
variable cost, indirect cost, and allocation and apportionment. The financial performance is
measured in accordance to the test ratio, current ratio, capital gearing return on assets and others.
Aim
The aim of this report is to determine the costs, profits, volume, sources and distribution of
funding and management accounting information in context to the travel and tourism industry.
Task 1 (LO1, AC1.1, 1.2, 1.3, M1, M2, M3, D1, D2, D3)
1.1 Importance of cost and volume in context to financial management of
tourism and travel
Evaluation and understanding of the cost and volume is in relation to the breakeven point. For
the determining this, there are various assumptions which are accorded in context to finding the
volumes and cost. As commented by Becker (2016, p. 22), the assumptions can be generated by
the units sold or the variable and fixed costs. Variable cost is basically the cost that varies in
context to the services provided or the production volume. Fixed cost is identified as the cost
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which does not change and is unavoidable in any business. The fixed cost can be determined by
insurance, property taxes and the depreciation. The breakeven point is analysed with the help of
this tool. In this context the variable and fixed sales remain constant. In accordance to the
tourism and travel the CVP plays an innate role to analyse the financial matter of the
organization. The fixed costs are entailed on a regular basis and are also often termed as period
costs. The needs of the future are evaluated and analyzed in an efficient and effective regard in
the Carnival Corporation and plc Company (carnivalcorp.com, 2018). The effective decisions are
enabled through this CVP analysis so the company always remain in profit. It also provides with
information that helps the company to analyze the situation. For example, the profit and loss can
be determined using this tool. The variable fixed cost is regarded for an effective and efficient
performance. Apart from the fixed variable, the volume, cost and sales are incorporated to
enhance the efficiency of the organization and the business. Obtaining the data is mostly easy as
the result can be derived by putting the formula. It is a simple tool as extra efforts are not needed
to derive the results. The allocation of the fixed costs is generated on the basis of the absorption
in context to the accounting of costs. The overhead costs and fixed manufacturing cost are
generally assigned and are recorded. After the selling of the units the charge is generated on the
basis of the cost of sold goods. However, the effective result in the travel and tourism can be
generated by the CVP analysis.
1.2 Evaluation of pricing methods in context to travel and tourism
Earning profit is very vital for any organisation. The profit of the business is very important to
maintain efficient and effective management system. The pricing aspect is very crucial as it
determine the price of the goods and the services. There are several methods which help to
analyse the pricing methods in context to the travel and tourism. This includes cost oriented
pricing method, target pricing, market oriented pricing method, transfer pricing and going rate
pricing.
Cost oriented pricing method
Margins are enabled that enables to derive the profit in context to the business. Profits can be
determined easily in context to pricing.
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Target pricing
It is initiated by identification of the price to which the service can be generated as profitable in
the, market. The target can be computed by the subtraction of the profit in context to the market
price.
Market oriented pricing method
The price is generated by the prevailing competition. This method is determined by the
competition in the market arena. The Carnival Corporation and plc Company is planning a tour
to Australia to which the charges will be £ 40,000 for travel and hotel expenses. The meal
charges will be around £ 160 variable cost per tourist. As commented by Walker and Walker
(2016, p. 2), the Cost oriented pricing is generated in the business arena because it serves as an
efficient margin in context to the business that can result in profit and effectiveness of the
business.
Transfer pricing
As commented by Standing et al. (2014, p. 83), it generally refers to the price initiated for the
transfer of goods from one place to another. For example, transfer of goods from one economic
unit to the other.
Going rate pricing
It is a method in which price is initiated on the basis of the current market price. However, there
are several components which are to be kept in mind in context to pricing strategies. As
commented by Mahrous and Hassan (2017, p. 1049), these include rack rates, seasonal pricing
and last minute pricing. Tourism is a complex market industry and pricing is a major component
of this industry. There are certain common pricing types which includes per person pricing,
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single and double occupancy and per unit pricing.
Figure1: Pricing Methods
(Source: Learner)
1.3 Factors which influence profit in relation to travel and tourism business
The factors which generate profit for the Carnival Corporation and Plc are-
Efficient management strategies are effective to influence profit to the tourism and travel
business. As commented by Sharpley and McGrath (2017, p. 65), the manner of planning the
tours are responsible for the generation of profit. If the planning is done on a effective manner
than the profit rate will be high. There are several strategies which can be generated to gain
profit. For example, advertising is a very vital component in the travel and tourism industry.
Promoting the company can enhance the growth of the potential customers. As commented by
Tigre Moura et al. (2015, p. 528), market is all about competition and several promotional
campaigns are entailed by the companies to maintain their profit growth. Tours and travelling
business can be advertised in the social platform by using various social media channels.
Understanding the customers and making an effort to provide their want can also result in the
positive growth for the travel and tourism business. As commented by Varasteh et al. (2015, p.
131), travel and tourism is most dependent on their consumers and providing the facilities that
the consumers are looking for can procure the profit rates in context to the Company. Offering an
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exceptional experience with best accommodation in renowned hotels, providing good meal are
required to grab consumers.
In this context, the Carnival Corporation and plc is a supreme travel company where the amount
charged for accommodation is £ 70,000 including various fares (flight, bus, and car). There were
a total of 70 tourists. The meal charges were £ 160 per head (variable cost). There are a total of
70 tourists so the variable cost is £ 160*70 that is equal to £ 11200. The total cost is generally the
addition of the variable and fixed cost which is £ 73,000 after certain discounts. The business
organization is charging £ 900 per individual so the amount charged is £72000. Thus this states
that the organization is generating a loss of £ 1500. The estimated profit decided by the
organization was £ 10000 so it is required by the organization to charge £ 927.77 per head.
Accommodation
Fares
£ 70000
Total cost £160 per person
Total tourists 70 people
Variable cost 160*70= £ 11200
Table 1: variable cost
(Source: Learner)
As commented by Law et al. (2015, p. 431), calculating the variable cost is very simple and
effective to determine the profit. It is simply done by multiplying the total number of tourists
with the total cost.
Task2 (LO2, AC2.1, 2.2, M1, M2, M3, D1, D2, D3)
2.1 Various types of management accounting information
The management accounting in the travel and tourism business is helpful as it helps to manage
and collect data from time to time. It also looks after the working system in internal and external
terms. As commented by Dickinson et al. (2014, p. 84), the accounting is done on the time to
time basis as if any conflict rises, than it can resolved immediately. Defaults generally reduce the
effectiveness and efficiency of the business and managing the flaws of the organization will help
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to cater good services to the consumers. The various types of management accounting
information are-
Cost allocation report
In this context the allocation is generalized on the basis of resources pertaining ion the business.
They are needed to be present in the early stages so that no complex situation can pertain in the
future. This method is useful as it is helpful to keep an ongoing track or record of the outcomes
related to the business. As commented by Ormond and Sulianti (2017, p. 95), monitoring over
the functions of the business are procured to be helpful in the long run.
In this regard, the Dalata Hotel has planned to earn an estimate of £ 10,000 from their hotel
business. The Dalata hotel has also estimated to earn £ 200000 from their hotels in the Ireland
and UK. The evaluation of the accounting needs to be good to gain profits to an organization. A
bad accounting system will not be able to generate profits in the long run.
Budget report
The budget report is basically a documentation in which the expenses of the future are entailed in
details. The management accounting helps to take in all the future expenses and this is
considered as the best possible way of documenting the reports of the future. The budget report
of a company has several sections depending upon the various financial needs and data in
context to the business. As commented by Mowforth and Munt (2015, p. 2), this includes the
sales information, general income, flexible and fixed expenses. Sometimes the budget reports
(extensive) also includes a letter in context to the financial changes and predictions of the
business. A budget report can be big or small depending on the size of the Company. In this
context, the Dalata Hotel Group plc is having around 38 hotels of three and four stars. So the
budget report of the company will be a big report with graphs and charts. The budget reports
containing future predictions are entailed with the charts and graphs to procure the growth plans
of the organization.
Job cost report
This report is basically the starting point of the data pertaining in the other reports. This lists all
the costs in context to the previous period. The main focus lies on the business arena from where
extra profit can be generated. In this regard, no efforts, time and money are invested on the non
profitable components. The respects through which profits can be evaluated and analysed are
generated in this report in context to the profit generation projects. However, a good estimation
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is required in order to attain job costing report. As commented by Forno and Garibaldi (2015, p.
202), arrangement of the estimates in cost categories are used to get the actual cost information.
Figure 2: Management Accounting
(Source: Learner)
2.2 Assessment of the use of management accounting as a decision-making
tool
An organisation always has been found with the tendency of investing the maximum funds into
the capital projects. In accordance with the statements of Seetanah and Sannassee (2015, 211), it
has been known that the capital projects of a business are able to obtain comparatively maximum
profit. It has also been found that the larger projects of a business to generate a huge amount of
return on the respective investment of the organisation. From the comments provided by
Giaoutzi (2017, p. 78), it can be seen that there are different techniques, which have been using
in the analysis of the estimated profit that can be obtained from the respective business project.
These techniques also help to predict the returnable amount of the total investment made by the
organisation. These techniques have been listed as follows:
Rate of accounting of earned return
The rate of accounting of the earned return on the total investment of the business on the
respective capital project reflects the differentiation among the amounts. In accordance with the
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BudgetreportJobcostreport

words provided by Chen et al. (2016, p. 155), it can be said that the respective technique has
taken into consideration the amount of total investment, and the obtained return amount, which
has been derived from the capital project of the business. With the help of this technique,
difference between the estimated return amount and the actual return amount on the total
investment can be derived. As per the statements of Goodwin (2015, p. 37), it can be said that
this technique is comparatively easy and simple for using the management as an accounting tool.
Cash flow of discounted amount
In the cash flow of the discounted amount, it has been seen that the rate of the discounted amount
has been made on the total return that can be derived from the capital project. As per the
statements were given by Luh Sin et al. (2015, p. 125), it can be said that the cash flow refers to
the rate of the discount that can be derived from the amount of return, in the future outcome of
the project that has possessed the maximum investment.
Risk in investment and analysis of the sensitivity
There can be found various risks related to the investment of the organisation that has been made
on the capital project for gaining higher profit from the total investment. As per the statements
provided by Alegre and Pou (2016, p. 615), it can be said that all the risks, which have been
found to be associated with complete investment made by the organisation would have the
requirement of analysing properly. This will help the management team of the organisation to
take measures against the relative risks. The adopted measures will help the management to
reduce or to prevent the negative impacts of the respective risks. This will literally help the
organisation to suffer from the financial depression.
Payback period
It has been found that the payback period has been chosen as the most efficient as well as
effective tool of accounting, which has be4en used by the management of the respective
organisation on a larger scale. From the words of Padurean et al. (2015, p. 180), it can be said
that this accounting tool is mostly being used in the small-scale business. By implementing the
respective accounting tool, the relative organisation can easily derive higher profitability from
the investment made on the capital project.
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Task3 (LO3, AC3.1, M1, M2, M3, D1, D2, D3)
3.1 Financial accounts of travel and tourism
From the given scenario, it has been known that Dalata Hotel Group Plc is a hospitality
organisation. Dalata Hotel Group Plc has possessed two hotels in Ireland and UK, which have
been known as respectively Clayton Hotels and Maldron Hotels. The organisation has been
found to serve 7700 rooms including both the hotels. All the different services provided by the
respective organisation including the services and the offers on the holidays. The financial
interpretation of the respective organisation of the financial year 2017 is as follows:
Particulars 2017
Profitability Ratio
Return on assets 2.4
Return on equity 3.5
Liquidity ratio
Current ratio 1.6
Quick ratio 2.4
Investment ratio
Earnings per share 1.3
Equity ratio 3.5
Table 2: Financial Performance of Dalata Hotel Group Plc.
(Source: dalatahotelgroup.com, 2018)
Profitability ratio
Profitability ratio of the respective organisation consists of the returns that have been derived
from the total assets of the organisation of the financial year 2017. It has been seen that the
respective ratio of financial analysis also consists of the return that can be derived from the total
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equity of the respective organisation. From the data of Dalata Hotel Group Plc, it has been seen
that the return on total organisational assets for the financial year 2017 was 2.4 and the return on
the equity of the organisation was 3.5.
Liquidity ratio
Liquidity ratio of the respective organisation consists of the current ratio that has been derived
from the total assets of the organisation of the financial year 2017. It has been seen that the
respective ratio of financial analysis also consists of the quick ratio that can be derived from the
total equity of the respective organisation. From the data of Dalata Hotel Group Plc, it has been
seen that the current ratio on total organisational assets of the financial year 2017 was 1.6 and the
quick ratio on the equity of the organisation was 2.4.
Investment ratio
Investment ratio of the respective organisation consists of the earning per share that has been
derived from the total assets of the organisation of the financial year 2017. It has been seen that
the respective ratio of financial analysis also consists of the equity ratio that can be derived from
the total equity of the respective organisation. From the data of Dalata Hotel Group Plc, it has
been seen that the earning per share on total organisational assets of the financial year 2017 was
1.3 and the return on the equity of the organisation was 3.5.
Task 4 (LO4, AC4.1, M1, M2, M3, D1, D2, D3)
4.1 Sources and distribution of funding
There can be identified various sources of investments, which leads to generate funds. In
accordance with the words of Chen et al. (2016, p. 161), it can be said that the sources of funds
for an organisation to invest on the capital project may include retained earnings, loans, and also
various equities of the organisations. As per the comments made by Luh Sin et al. (2015, p. 129),
it can be said that the other sources of funds for the respective organisation can be developed by
inviting different investors from the locale as well as the other regions. This will help the
organisation to generate foreign currency. This will literally help the economy market of UK to
gain higher sustainability in the respective economy as compared to the global market. With the
help of foreign investment, a market economy can develop a higher economy of scale. The
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organisations under the consideration can derive loan from the creditors as well as various banks.
The profit that has been earned from the capital invested in the past project of the respective
organisation can be considered as the retained earnings of the organisation. Therefore, the
respective organisation can apply its past profits and also the derived returns on the total
investment for the future project. In accordance with the words provided by Seetanah and
Sannassee (2015, p. 214), it can be said that an organisation can generate fund from various
stakeholders relative to the respective organisation. With the help of the short-term loan, there
may be less of risks in the investment. Therefore, the small-scale organisation can select short-
term loans instead of long-term loans, to avoid the negative impacts of investing in the capital
projects.
Conclusion
The study has helped to derive the financial performance of Dalata Hotel Group Plc. and the
Carnival Corporation and Plc. In the conducted study, there has been found the proper
accounting tool for an organisation, which will help the management team of the respective
organisation to evaluate the profitability. This study has evaluated the process to gain the
maximum return on the total investment on the capital projects, which have been made by the
investors as well as the owners of the organisation. The appropriate decision-making tool for the
management of the concerned organisations has been determined from the conducted study.
There have been found the sources of the funding that can be distributed to the various projects
of the organisation. By implementing the technique of payback period accounting tool, the
relative organisation can easily derive higher profitability from the investment made on the
capital project. With the help of rate of accounting of earned return technique, difference
between the estimated return amount and the actual return amount on the total investment can be
derived. The small scale organisation can select short-term loans instead of long-term loans, to
avoid the negative impacts of investing in the capital projects. This is because short-term loan
there may be less of risks in the investment.
14

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