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, examining key concepts like cost, volume, and profit analysis. It utilizes real-world examples of Carnival Corporation & plc and Dalata Hotel Group plc to illustrate practical applications of financial management principles. The report analyzes pricing methods, factors influencing profitability, and the role of management accounting information in decision-making. Additionally, it explores sources and distribution of funding for capital projects associated with tourism development, highlighting the importance of both public and private investment.

2 Finance and Funding in the Travel and
Tourism Sector
1

Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
Introduction.............................................................................................................................................4
1.1) Explain importance of costs, volume and profit in financial management of Carnival
Corporation & plc....................................................................................................................................5
1.2) Analyze pricing methods used in travel and tourism sector.........................................................9
1.3) Analyze factors influencing profit of travel and tourism business using Carnival Corporation &
plc. 11
Conclusion.............................................................................................................................................12
TASK 2.....................................................................................................................................................13
2.1) Explain different types of management accounting information used in travel and tourism business
using Dalata Hotel Group plc. (2.2).......................................................................................................13
TASK 3.....................................................................................................................................................22
Introduction...........................................................................................................................................22
3.1) Interpret financial accounts of Dalata Hotel Group plc by showing at least two year’s performance.
...............................................................................................................................................................23
Conclusion.............................................................................................................................................25
TASK 4.....................................................................................................................................................26
4.1) Analyze sources and distribution of funding for the development of capital projects associated with
tourism...................................................................................................................................................26
Conclusion.................................................................................................................................................28
2

References.................................................................................................................................................29
3

Introduction
The analyses in the report have been done to provide the understanding of costs, volume and
profit so that the decision of future can be taken in travel and tourism sector. This is explained
with the motive of enhancing the financial performance of organization. The methods of pricing
that can be used by the Carnival Corporation & plc are also depicted so that the
information for pricing of product can be determined. The factors that influence the profits of
Carnival Corporation & plc are also explained. The training package predicts that how the
training will be provided to non financial managers so that they can get understanding of use and
the types of management accounting systems. The ratios of Dalata Hotel Group Plc are
calculated and for practical implementation 2016 and 2017 data are evaluated. The various
sources which are used for funding is defined with the distribution of funding for the
development of tourism sector.
4

TASK 1
Introduction
Carnival Corporation & plc is the world’s largest travel company with the cruise brands in
Europe, Australia and North America. It also owns the tour company which has its operations in
Holland America princes Alaska Tours. The headquarters are located in Miami, Florida.
5

1.1) Explain importance of costs, volume and profit in financial management of Carnival
Corporation & plc.
The cost can be defined as the total of all the expenditures which are incurred in business during
the particular year for the production of goods and services that can satisfy the needs and
demands of customers (Rawes, 2018). There are various types of cost in Carnival Corporation &
plc which will help in increasing the revenues of business such as:
Image: Cost
Source: By Author, 2018
Direct and Indirect Cost: These are the costs which are directly attributed to the production of
goods and services such as the direct labor while the indirect cost is the cost which are difficult
to assign to specific products such as in case of Carnival Corporation & plc it will be
depreciation and the administrative cost (Rawes, 2018). The depreciation of the Carnival
Corporation amounted to be £1846 million during the year 2017.
Fixed and Variable Cost: These are the costs which remains constant in all level of output. The
amount of fixed cost in Carnival Corporation & plc is £2.12 billion. The variable costs are those
which changes in all level of sales volume (Rawes, 2018). The amount of variable expense of
commission for 2017 was £2.35 (Carnival Corporation & plc, 2018).
6
FixedCostVariableCostTotalCost

The allocation and apportionment cost means the allotment of properties to the items of the cost
units. It covers the centers such as salaries and other running cost (Rawes, 2018).
Volume: The volume helps in generating the revenues for business so that the profits of Carnival
Corporation & plc can be enhanced.
Image: Volume
Source: By Author, 2018
Break Even Analysis:
7
BreakEvenAnalysisEconomiesofScaleDiseconomiesofScale

Image: Break Even
Source: Knowledge Grab, 2018
The break-even point is the point where the organization is neither earning profits nor incurring
losses. This will help Carnival Corporation & plc in setting of prices which covers the fixed cost
of investment (Knowledge Grab, 2018). It can be seen if the organization has to increase the
profit so cost will be determined after the breakeven point.
Economies of Scale: It is advantage to large firms so as they have large operations which will
help them in negotiating terms with suppliers by bulk purchasing (Economics Online, 2018). The
economies of scale of Carnival Corporation & plc are £10.2 billion (Carnival Corporation & plc,
2018).
Image: Economies and Diseconomies of Scale
Source: Economics Online, 2018
Diseconomies of Scale: This is the disadvantage to the large firms as they have the complex
organizational structures and communication barriers. The losses incurred by the Carnival
Corporation & plc are 1.626% of the income amount (Economics Online, 2018).
Cost Volume and Profit Analysis
It shows the reaction of cost and profit with the change in sales volume so that the better level
can be decided by the managers. It provides various advantages to Carnival Corporation & plc
such as:
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 It helps in making better decisions for future by analyzing the cost and volume.
 It also helps in forecasting and then fixing the prices accordingly so that the revenue of
carnival Corporation can be enhanced.
 This also controls and coordinates the various activities within organization.
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1.2) Analyze pricing methods used in travel and tourism sector.
The pricing in the tourism and travel business should be decided according to the profit margin
of organization and by considering the current trends which are prevailing in market. In this the
Carnival Corporation & plc this will help in increasing the revenues of business.
Image: Pricing Strategies
Source: By Author, 2018
Demand Based Pricing: This is the pricing strategy in which the price of the product is
determined according to the demand of that product (Morgan and Pritchard, 2012). The demand
for rooms will be high during peak season so the prices will be kept high and the demand during
the off season will be low so low prices will be kept. In the Carnival Corporation & plc the price
during off season will be £325 per person and in peak season it will be £720 (Carnival
Corporation & plc, 2018).
Cost Based Pricing: The price is decided by adding profits to the initial cost so that the final
cost of product is decided. In Carnival Corporation & plc the cost per person will be kept for 5
days at £1325 after all the adjustments of profit. This is the sales amount which is decided for the
actual sales (Carnival Corporation & plc, 2018).
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DemandBasedCostBasedCompetitionBasedValueBased

Competition Based: Here the prices are decided according to the competitor’s price. When the
prices of competitor are high the price is kept low and vice versa (Morgan and Pritchard, 2012).
The competitor of Carnival Corporation & plc is Norwegian Cruise Lines so the prices of them
are set at £520 per person for the deck rooms so the Carnival Corporation & plc will set the price
at £440 per person so as to attract customers and increase revenues (Tehrani, et. Al., 2012).
Value Based Costing: The product’s cost is determined according to the value. In Carnival
Corporation & plc the rooms which are on the sea side their prices will be high and those on suits
will be low (Carnival Corporation & plc, 2018). The prices of the deck rooms will also be based
on the tourists visiting. The price of sea side is kept at £900 per day and of suits will be at £320
per person (Morgan and Pritchard, 2012).
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1.3) Analyze factors influencing profit of travel and tourism business using Carnival
Corporation & plc.
Profit means the revenue of the organization which is evaluated by subtracting the total cost from
total revenue (Morgan and Pritchard, 2012). The profits are necessary for all business so as to
increase the efficiency within the organization. The factors that may impact the profit of Carnival
Corporation & plc are:
Economic: The economic factors such as the interest rates and the income of the customer if
change in any of those factors will impact the profit of organization (Morgan and Pritchard,
2012). The income of the customers who are availing the services of Carnival Corporation & plc
increases so the demand will rise and in turn the profit will increase like 2017 the profits
increased to 1750 Crores USD.
Political: The political factors may also impact the profit like the change in tax policies and the
regulations of government the less number of the customers will be able to avail the services.
The change in the tax policy of the Carnival Corporation & plc incurred the losses of £3 billion
(Evans, et,. al, 2012).
Technological: In Carnival Corporation & plc there was the increase in profits with 63% due to
the upgradation of new technology to provide services (Evans, et,. al, 2012). This increase was
seen as the new technology attracted large number of customers and thus in turn the revenue
increased.
Social: The social factors mean the change in demography and the lifestyle of customers who are
availing the service. The change in the lifestyle impacted the profit of Carnival Corporation &
plc by 1.7% as compared to other years.
Staff: The number of the staff members also impacts the profit as the wages paid to employees
may be increased or decreased (Evans, et,. al, 2012). The staff members of the Carnival
corporation & plc increased to 1,22,000 which increased the expenses of the firm and thus the
profit was decreased (Morgan and Pritchard, 2012).
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Conclusion
It can be stated that the pricing is of most importance to the Carnival Corporation & plc as it will
help in increasing the profits by minimizing revenues. The change in the volume also impacts the
cost as well as revenue of organization.
13

TASK 2
2.1) Explain different types of management accounting information used in travel and
tourism business using Dalata Hotel Group plc. (2.2)
Slide 1: Title
14

Slide 2: Table of Content
15

Slide 3: The training is provided to the non financial managers for the use and types of
management accounting in Dalata Hotel Group plc so that the errors within the organization can
be reduced and the growth can be achieved (Ahlemann, et. al., 2012).
Slide 4: There are various types of the management accounting information such as the financial
statements, budgets and forecasts so that the decisions related to future can be taken and the
profits of the Dalata Hotel Group can be increased (Ahlemann, et. al., 2012).
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Slide 5: The financial statements are those which present the financial information in the
presentable manner in the annual reports through which top level managers of the Dalata Hotel
Group plc can take the strategic decisions.
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Slide 6: The balance sheet includes the assets and liabilities of the organization (Ahlemann, et.
al., 2012). These also helps in analyzing that how the assets of the Dalata Hotel Group plc
through debt or equity. It will help in evaluating the financial position.
Slide 7: This statement will show the areas through which the revenue has been earned by the
Dalata Hotel Group plc (Lindman, 2012). It will also help in maintaing the accountability by
making the improvements in the areas where the improvements can be made.
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Slide 8: Through this the inflow and outflow of cash from the business operations of the Dalata
Hotel Group plc is done can be determined. It will also show that how much cash is to financed
from the external sources (Lindman, 2012).
19

Slide 9: The budgetary reports are the reports which helps in predicting the variances by
comparing the actual performance with the budgeted one and then the actual position of the
Dalata Hotel Group can be determined (Lindman, 2012).
Slide 10: The management accounting systems are of most importance as it helps in taking the
decisions related to the future and also provides the information to the employees inside the
Dalata Hotel Group for the related information (Lindman, 2012).
20

Slide 11: The current trends are forecasted by the management accounting information of Dalata
Hotel Group plc with this it also helps in meeting the goals and objectives of the organization by
analyzing the current issues (Ahlemann, et. al., 2012).
21

Slide 12: It can be analyzed that the management accounting pays the key role through which the
performance of the Dalata Hotel Group can be evaluated and the decisions related to future can
be taken.
Slide 13: References
22

TASK 3
Introduction
This explains about the analysis of the financial statements of the Dalata Hotel Group Plc so that
the financial performance of the organization is evaluated. The profitability, liquidity, debt and
the efficiency ratios are calculated.
23

3.1) Interpret financial accounts of Dalata Hotel Group plc by showing at least two year’s
performance.
The profitability ratios are those which help in measuring the financial performance of the
organization. The return of assets is calculated so s to evaluate that how efficiently the assets are
managed by the Dalata Hotel Group plc so that the maximum revenue can be generated (Dalata
Hotel Group Plc, 2015). The return was 0.056 in 2016 but in 2017 it was 0.079 which showed
that the assets are more effectively and efficiently utilized (Kenneth, et. al., 2012).
The return on capital will also help in analyzing the profits by analyzing the efficiency of capital
which is invested. The return which is received by the Dalata Hotel Group Plc in 2016 was .11
and in 2017 it was .17 which showed that the returns were received less in 2016 but in 2017 it
increased (Peavler, 2018).
It shows the ability of the company to pay back the debts from the liabilities. The two ratios are
calculated for analyzing the liquidity position of the Dalata Hotel Group Plc which is current
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ratio and quick ratio (Dalata Hotel Group Plc, 2015). The current ratio analyzes that how the the
current liabilities will be paid off from the current assets. The ratio when compared with 2:1
shows that in 2016 it was 1.44 but in 2017 it decreased to 0.46 so the Dalata Hotel Group does
not have enough assets to fund the liabilities (Kenneth, et. al., 2012).
The quick ratio shows the ability to pay obligations from the quick assets. In case of the Dalata
Hotel Group Plc it showed that in 2016 and in 2017 the ratio is increased it showed the negative
results so the organization should maintain its assets so that the obligations can be paid (Dalata
Hotel Group Plc, 2015).
The debt ratio is to evaluate the total liabilities with respect to total assets. It is calculated by
various companies so that improvements can be made accordingly. The ratio is .59 in 2016 but
has reduced to .49 in 2017 which showed that the equity of the Dalata Hotel Group plc has been
increased with respect to earlier years. The amount of debts should be less than the equity. The
Dalata Hotel Group should raise its capital through equity so that the equity can be increased and
the amount of debts can be decreased. The ratio has been increased so it can be said that the
Dalata Hotel have much equities to finance the debts of organization.
These are the ratios which evaluates the overall efficiency of business. It helps in evaluating the
operating profit of the organization through the analysis of profit with respect to sales. The ratio
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has been increased from 62% to 63% which shows that the profits have been increased and thus
the growth can be achieved (Dalata Hotel Group Plc, 2015). This ratio also shows the
productivity of the organization as the resources are well utilized by the Dalata Hotel Group
which led to the increase in profits during the year 2017.
It shows the relationship of the sales and the expenses of the Dalata Hotel Group Plc. It shows
how the company is efficient to manage the administrative expense with respect to sales. The
administrative expenses in 2017 the resources were much better utilized than in 2016. The
resources should be more efficiently used so that the inefficiencies of the Dalata Hotel Group can
be managed (Brigham and Houston, 2012). This is called the operating ratios as it takes into
consideration the expense of the organization during its evaluation (Dalata Hotel Group Plc,
2015).
Conclusion
The ratios help in analyzing the financial performance so that the profitability of Dalata Hotel
Group can be increased and the growth can be attained. It shows the solvency and the liquidity
position of organization. The financial health of the Dalata Hotel Group is in good condition so
the investors can take decisions related to investment in the particular firm.
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TASK 4
4.1) Analyze sources and distribution of funding for the development of capital projects
associated with tourism.
The capital projects are those projects which are done so that the innovation of the existing
project can be done or the new project can be initiated so that the revenues of the firm can be
maximized and the overall profitability of the firm can be increased (Chua, et. al., 2012). The
developments are done so as to enhance the infrastructure and increase the investment for long
term. The fundings for these projects are taken either from the public or private. The public
funding provides the funds to those of the capital projects whose aims are to construct and
maintain the capital projects for the development or benefit of society (Chua, et. al., 2012).
While the private fundings are done so that the overall revenues of the firm can be enhanced and
the profitability of the firm can be increased. The investment which is done in the Angel
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Meadows was done by the public organizations as these are the heritage which is renovated so
that most of the visitors can get attracted and in turn the overall society can get benefitted from
same. The heritage also shows the tradition of that particular area (Chua, et. al., 2012). The
distribution of funds plays the major role as if the distribution will not be done in proper manner
the overall motive of capital projects will not be achieved. So, the amount distributed to Angel
Meadows is £235 million (Dudley, 2012). £3.4 billion of the funds are allocated to Leamouth
Bridge and river side foot path which is funded by the government so that the society can get
benefit from that. With that the £13700 was also allocated to West Pennine Moors which are
funded by the private institutions as there motive is to increase profits for the organization (Chua,
et. al., 2012). The funds within the organization should be distributed in such a manner so that
the overall profits of capital projects can be maximized and the goals can be achieved (Dudley,
2012).
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Conclusion
The report has been executed so that the understanding of various aspects of management
accounting systems which are useful for the business operations can be evaluated. The cost,
volume and profit analysis of the Carnival Corporation & plc has been done which will help
them in taking the decisions and setting the prices of the product. Various strategies that can be
used by the Carnival Corporation so as to increase the revenues are also explained. The factors
that may affect the profits are determined so that the actual evaluation of profit is done. Besides
this, the use of management accounting system is explained which can help the managers of
Dalata Hotel Group to take decisions. The interpretation of the financial statements of Dalata
Hotel Group is also done so that the financial performance can be evaluated. The last part of
report deals with the sources and the distribution of funds that will help the capital projects to
attain success and increase revenues of business.
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