[SOLVED] Financial Performance and Decision Making for Dalata Hotel Group Plc

This assignment focuses on the application of management accounting information as a decision-making tool for Dalata Hotel Group Plc. It explores the company's financial performance, liquidity, and strength through various financial statements and metrics. The assignment also delves into investment decisions, cost of capital, and solvency ratios to assess the company's ability to meet long-term financial commitments.

FINANCE AND
FUNDING IN TRAVEL
AND TOURISM
SECTOR

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of costs and volume in financial management...................................................1
1.2 Pricing methods used in travel and tourism sector................................................................2
1.3 Factors which are influencing travel and tourism sector......................................................3
Task 2...............................................................................................................................................5
2.1 Various types of management accounting information (Dalata Hotel group plc)................5
Financial statements....................................................................................................................5
Budget.........................................................................................................................................6
2.2 Application of management accounting information as a decision making tool (Dalata
Hotel group plc)..........................................................................................................................6
TASK 3............................................................................................................................................8
3.1 Interpret financial statements of Dalata Hotel Group Plc for past two years........................8
TASK 4..........................................................................................................................................11
4.1 Analysing sources and distribution of funding for capital projects in tourism...................11
Sources.....................................................................................................................................11
Non-Public Funding................................................................................................................11
Capital Projects.......................................................................................................................12
Tourism Information Point (TIP)-.............................................................................................12
Small Scale Tourism-................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Funding and finance is very basic aspect which has been required for particular amount of attention and time by any of the
business for better growth and even for economy. So with this perspective a travel and tourism company known as Carnival
Corporation Plc has been planning a trip and according to it cost volume and profit analysis is particularly done with the perfect
strategy. The present report is giving brief understanding on the significance of cost and volume in financial management. The
different pricing methods which can be applied in the travel and tourism sector has been elaborated. Further it has been continued with
the factors which are influencing the profit for travel and tourism businesses. There are various applications of management
accounting information which are used in business of travel and tourism. As there are various sources and distribution of funding for
development of public and non public tourism and in last scenario all the sources are analysed properly.
TASK 1
1.1 Importance of costs and volume in financial management
Cost can be defined as the amount which has to be given or paid to buy or obtain anything and with reference to business, it is
a monetary valuation of the material, time and utilities, resources and efforts which are consumed. Volume can be defined as the
amount of expenses which are purely denoted in monetary aspects and it is a measurement of finance related to business. Cost volume
profit analysis is usually referred as a process of planning that a management has been using for forecasting the future volume of any
activity and cost which is incurred, profits which are received and sales which are performed. It gives proper analysis on the changes
in sales and cost which are directly impacting the income related to future periods. Carnival Corporation and plc is the world's largest
leisure travel company whose portfolio is of 10 global cruise line brands. This company even owns a tour company which
complements in cruise operations (Barr and McClellan, 2018).
Cost and volume; both are essential for travel and tourism business. In the aspects of cost, it helps in cost reduction, decision
making, to improve the performance of management and in designing effective financial structure. Cost is a crucial factor as it gives
cost reduction in activities which are related to business and give high profit for business. It can be increased or decreased according
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to the requirement of business. The financial account of the business are managed by costs. The process of decision making on capital
budgeting for getting the best return on the investment. The financial structure can be managed and designed with various costs of
travel and tourism activities which are linked with business. The different projects get various costs of the project which help in
improving the performance of financial management and for comparing the business's financial ability of travel and tourism.
There are different kinds of volume with respect to business. There is basic necessity of volume analysis for the business like
travel and tourism. Travel and tourism business can save the money by applying economies of scale as it gained the saving of cost
with increment in level of production. There is need of determining the process of break-even analysis at the point where the
businesses can recover the initial cost which has been spent on the earlier expenses. For the business like travel and tourism, it is
essential to determine break-even point to pertain the cost of covering duration. In the scenario, if economies of scale do not perform
effectively then it is referred as diseconomies of scale. The tourism business, analysis of volume is essential to know about the
working of business.
1.2 Pricing methods used in travel and tourism sector
There are various methods of pricing which can be used by the business of travel and tourism and Carnival Corporation plc
such as rack rates, seasonal pricing, last minute pricing, common pricing types as well as discounting and package deals (Praticò,
Saride and Puppala, 2011).
Rack rates: Every business must have rack rate i.e. full rate which is stated as rate where discounts are applied and which are
generally given to the wholesalers and which is printed on the brochures for the coming season ahead. The full rate is usually applied
all the time without any discounting which is day to day and this is for attracting operators. For accommodating the operators
especially in the middle markets which will usually be charging full price for two months or a month to fulfil gaps.
Cost oriented pricing method: It is the pricing method which usually adds certain margin to cost which enables for deriving
the margin from operations related to business. It is the easiest way for determining margin as it is very clear and understandable.
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Seasonal pricing: It is a standard process for travel and tourism business for catering the various levels of demand during the
year. It can be referred as a mix of pricing for covering high and low seasons throughout the year. Usually, it will be constant for every
date periods but it will be implied on holiday dates of schools and colleges as well as some local event of every year.
Pricing at last minute: It is referred as the most common method for suppliers for accommodation to cover the gaps in the
availability of inventory and it basically discounting on the routine prices which are related to advance bookings and are usually
promoted on the websites of last booking (Jobson, 2012).
Market oriented pricing method: The price has been determined according to the competition that is pertaining in the market
as cost is high or low and even based on the cost which prevails the market.
Common pricing types: It can be according to per person pricing, per unit pricing and single or double occupancy. Example
for per person can be prices of adult and children, per unit can be price per night.
Discounting: It cannot be avoided in the present scenario especially in the business of travel and tourism. Sometimes, it may
reduce the profit and even break-even point can be missed. Last minute pricing deals should be very selective and it should be reduced
every day. There should be some pattern, condition or some specific day to a discounted price such as minimum stay or the traveller's
number while booking. As something is better than nothing so, it will be one of the pricing strategies.
Package deals: Packages can be developed with tourism partners which are complimentary in the area where value added
components are essential for stimulating the demand and without any discount. It can be implied for targeting the niche market very
efficiently and effectively.
1.3 Factors which are influencing travel and tourism sector
Profit refers to the financial advantage which are earned from all the operational activities which are related to business. It is
the main focal point of every small or large company. Each and every industry has various factors which are directly impacting the
profit margin and similarly Carnival Corporation plc will be also having huge impact on the margin. If margin is affected then it will
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be directly linked to the business of whole company. Factors can be classified in two categories i.e. External factors and Internal
factors.
External factors
Seasonal variation: The tourist are usually attracted on the basis of seasons as typically they plan their trips in vacations or
summer holidays. The volume of business are usually changing according to the seasons. So in this way seasonal variations are
directly affecting the profit margin of the company (Song and et.al., 2012).
Political environment: it typically includes government regulations, foreign trade regulations, taxation policy and various
legal alterations which are impacting the activities related to businesses of the company. There will be occurrence of big losses to
Carnival Corporation plc when the international package has been booked in the old currency rate and there will be decline in
domestic currency with the perspective of foreign currency. If there is presence of any alterations in legal rules and regulations in the
international tour package then Carnival Corporation has to consider the law.
Economic environment: It consists of alterations in exchange rate, interest rate etc which will be directly affecting the
business's monetary transactions and it will be impacting the company's profit margin.
Competition: The margin of tour and travel business is very vulnerable for the entrants which are regular in the external
market and they purely follow the penetration pricing policy as it impact all existing players with perspective of profitability as it is
very difficult to be with the trend of matching fewer prices of every new entrants every time.
Social environment: It consists of alterations in demographics of population, social mobility, income distribution, lifestyle,
behaviour with respect to work or leisure, level of education and consumerism will be impacting the profit margin of Carnival
Corporation plc.
Internal Factors
Bad debts: It usually arises when customer does not pay the amount which has been fixed for services which are enjoyed by
him. When the charges are not received by the customer then it will be referred as bad debts for Carnival Corporation plc and it will
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reflect in the profit and loss account and it will be decreasing the margin or revenue of the company. The major contribution of cost of
a business is covered by expenses such as salaries and wages which are directly related to staff. If there is increment in these cost than
it will be impacting the level of margin of the company. The estimates of investments related to future are the part of process of
planning which will be on the basis of current margin. The prevailing market conditions are considered in planning as it does not
prepare the estimates with respect to future. If there are any alterations in the market conditions then it will ultimately affect the
planning of Carnival corporation and its profit level.
Task 2
2.1 Various types of management accounting information (Dalata Hotel group plc)
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Finance and Funding in the Travel and Tourism Sector
2.1 Various types of management accounting information (Dalata Hotel group
plc)
Management accounting is referred as the daily transactions which
are required to be performed by the managers. It also helps in retaining the
information regarding daily accounting which helps in framing effective
decision making. It helps for comparing past account with future accounts of the
organization. All information is recorded by the managers with the perspective
of monetary aspect. Dalata Hotel Group plc are using different types of
management accounting information such as;
Budget
The organisation financial situation is approached by management accounting in operational way. It
provides all the information which helps Daltan Hotel group plc for the process of planning and controlling. There
are several types of budget such as:
Financial budget: It traces the amount that how business is spending and receiving the finance as it includes
revenue, income from core activity of company and even costs from the capital expenditure. It is used by managers
for leveraging finance and its valuation of the company.
Financial statements
It is a formal record of all the activities related to finance of Dalata Hotel
Group plc. All these statements are in written format which helps in quantifying the
financial performance, liquidity and strength of the company. All the financial effects
related to business events and each and every transaction are reflected in financial
statements. Basically there are 4 types such as:
 Balance sheet : It is also known as statement of financial position which
represents the financial position of the Dalata Hotel Group plc at given
date. This statement consists of three elements which are Assets,
liabilities and equities.
 Income statement : It is also referred as Profit and Loss Statement which
indicates the financial performance with respect to net loss or margin
within the specific period. It consists of two elements such as Income and
Expenses.
2.2 Application of management accounting information as a decision making tool
(Dalata Hotel group plc)
 Investment decisions: These are the decisions which are related for
optimising the capital resources for earning high and efficient return. As
each and every business requires to be very careful for selecting the best
investment option so it is one where Daltan Hotel Group plc can adopt for
the growth strategy.
 The management accounting information should be purely considered by
business for taking appropriate decisions and for best result in the future.
 Forecasting the financial helps in process of decision making by giving
the overall structure of finance of Daltan Group that where the resources
will be utilised and how they will be affecting the usage of funds in the
specific manner.

TASK 3
3.1 Interpret financial statements of Dalata Hotel Group Plc for past two years
Financial ratios of Dalata Hotel Group Plc for two years 2016 and 2017
Particulars Formula 2016 2017
Profitability ratios
Gross profit ratio Gross profit / sales * 100 62.20% 63.20%
Net profit ratio
Net profit / sales revenue *
100 12.02% 19.60%
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 For planning the finance of the organization and future financial transactions, budgets are been prepared. These helps the manager for decision making and deciding
the activities required for funding in the future.
 Cost of capital is most important factor for designing optimal and balanced structure of capital. While taking decisions related to cost of capital there is need for
considering the goal of management has to maximize the value of firm and cost of capital should be decreased.
Solvency indicates the Daltan Hotel group plc' s capacity for accomplishing the long term financial commitments. It helps in observing that the cash flow of the organization are
sufficient to meet both long and short term liabilities. If the solvency is lower than there is great possibility it will be doing default on the obligations of debt. Usually solvency
ratio must be higher than 20 percent then it will be known as financially sound organization.. As it varies from industry to industry. For measuring the cash flow instead of net
income is better deciding factor of solvency generally for the organisations who incur huge amount of depreciation for assets but they perform very low level of profitability. So
in the same series by assessing the ability of organisation to accomplish all the obligations it requires the perfect picture of the solvency. Daltan Hotel group plc might have less
amount of debt but if the cash management practices are bad and accounts payable is a result then the position of solvency might not be good as it has been indicated by measures
which only include debt.

Return on Capital Employed
Earnings Before Interest
Taxes (EBIT) / Capital
employed 4.53% 7.56%
Return on Equity (ROE)
Net income / Stockholders'
Equity 6.03% 10.06%
Liquidity ratios
Current ratio
Current assets / Current
Liabilities 1.44 : 1 0.46 : 1
Quick ratio
Liquid assets / Current
Liabilities 0.83 : 1 0.35 : 1
Efficiency ratios
Receivables Turnover ratio
Credit sales / Average
accounts receivable 42.04 41.53
Stock Turnover ratio
Cost of Goods Sold
(COGS) / Average inventory 69.4 71.61
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Creditors' payment period
ratio
Purchases from suppliers /
Average accounts payables 42.33 38.98
Solvency ratios
Gearing ratio Debt / Equity 0.43 0.33
Debt to assets ratio Debt / Assets 0.25 0.22
The financial ratios are computed for two years for Dalata Hotel Group Plc such as 2016 and 2017. It is one of the biggest
hospitality organisation which satisfies ample of customers and thus, earns profits in the best possible manner. The financial ratios are
calculated showing performance of company in past two years and health can be easily compared with industrial average to assess
whether firm is performing well or not (Vieira do Nascimento, 2016). Profitability, efficiency, liquidity and solvency ratios are
computed which are provides clarity about performance of organisation in effective way. It can be interpreted from the gross profit
ratio that it was 62.20 % in 2016 which increased to 63.20 % in 2017. This shows that profit is increased by 1 % in 2017 showing
good earning capacity of firm with much ease. Moreover, it implies that firm is able to control expenses and as a result, profits are
maximised quite effectually.
Net profit ratio is calculated, it was 12.02 % in 2016 and maximised to 19.60 % in next year which clarifies that net income is
increased by 7.58 % which is a huge margin. This implies that firm has initiated good control over the operational expenses and thus,
net profits are maximised quite effectually. Moreover, Return on Capital Employed (ROCE) was 4.53 % in 2016 which increased to
7.56 % in 2017. It clearly shows that Dalata Hotel Group Plc is effectively generating sales on the investment made in assets in the
best possible way. It is increased and viability of firm can be evaluated with much ease. On the other hand, Return on Equity (ROE) is
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another profitability indicator which shows how effectively organisation is utilising shareholders' investment up too maximum extent
in order to generate sales quite effectually (Şen Küpeli, Koc and Hassan, 2017). In simpler words, it shows that whether company is
using investment in optimum manner or not. It can be analysed from the financial ratio that figure was 6.03 % in the financial year
2016 and increased to 10.06 % in 2017 which clearly implies that firm is utilising investment to generate sales in effective manner.
It can be assessed that overall profitability position of Dalata Hotel Group Plc is remarkable and is earning good quantum of
profits for injecting operational tasks in more effective manner. On the other hand, liquidity ratios are computed as well showing
whether company will be able to pay off short-term liabilities or not within one year. It can be interpreted from current ratio that it was
1.44 : 1 in 2016 which decreased to 0.46 : 1 in next year. It clearly implies that firm will face difficulty in making debt payments
becoming due within time frame of usually one year (Petrova and Hristov, 2016). The fact is cleared as market experts have
recommended that ideal current ratio is 2 : 1 which is adequate from the perspective of firm as it may easily accounts for short-term
payments. However, Dalata Hotel Group Plc has low ratio and is required to enhance current assets to pay off liabilities. Moreover,
quick ratio is computed which was 0.83 : 1 in 2016 and decreased to 0.35 : 1 in 2017 which shows that company will face difficulty in
paying liabilities from extreme liquid assets.
Efficiency ratios are computed as well. The receivable turnover ratio was 42.04 in 2016 and reduced to 41.53 in next year
which shows that firm is able to quickly collect amount from credit customers. Stock turnover ratio is also effective way to clarify
how quickly organisation is replenishing inventory in meeting production. Lessor the ratio, better for firm (Gurtner, 2016). The ratio
was 69.4 in 2016 which increased to 71.61 in next year which means that company is not quickly using inventory. Creditor payment
period is another useful ratio showing whether firm is making quick payments to suppliers or not. It can be interpreted that in 2016
was 42.33 and decreased to 38.98 which means that firm is quick in making payments. Solvency ratios such as gearing ratio, debt to
assets ratio is computed as well. Gearing ratio was 0.43 in 2016 and decreased to 0.33 in 2017 showing that Dalata Hotel Group Plc is
relying on equity financing than debt. Debt to assets ratio was 0.25 in previous year and reduced to 0.22 in 2017. Thus, it can be
analysed that overall financial performance is enhanced of company.
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TASK 4
4.1 Analysing sources and distribution of funding for capital projects in tourism
Non-Public Funding
Debt financing-
 Creditors give away funds to the tourism business
so that it may be able to carry out activities quite
effectually.
 It carries indebtedness as loan is to be repaid to
them. The principal amount along with interest
accrued on it is to be paid.
 In simpler words, firm is required to repay debt
together with the interest thereon.
 It is cheaper source of finance for the travel and
tourism business.
Thus, organisation can easily attain operational tasks by
utilising debt finance in effective manner
Capital Projects
Tourism Information Point (TIP)-
 The TIP is effective for passengers which assists
in exploring numerous destinations in effective
manner.
 This means that customer queries are resolved by
theseTIP so that they may be able to freely roam
about and travel to the destinations.
 Customers may contact TIP as they have no
knowledge regarding new city and as such,
problems are resolved quite effectually through it.
 Customer care executive assists guests so that
they may explore city with much ease.
Small Scale Tourism-
 The small scale tourism is required to be
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Equity financing-
 This is another source of finance which can be
used by company to raise finance by effectively
selling stock in the market and collecting funds
quite effectually.
 This means that organisation may easily attain
desired finance by selling shares in the best
possible manner.
 It is useful source for raising finance as no
obligation arises to repay any interest unlike debt.
 It can be used by business to garner finance for
meeting operational activities.
enhanced so that such tourism may also attain
profits with much ease.
 The government imparts grants by which small
scale tourism might be able to garner profits quite
effectually.
 This is required so that guests may also explore
rural areas and profits may be attained.
 Thus, government gives funds to enhance and
encourage tourism in the nation.
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CONCLUSION
Hereby it can be concluded that finance plays crucial role in travel and tourism business for meeting daily tasks in effective
way. CVP analysis is used to assess desired level of output in effective manner. Moreover, there are various factors influencing profits
of organisation. The pricing methods used in the travel sector are also important so that desired profits may be attained by using good
pricing technique. Financial ratios are vital in analysing overall financial performance of company. Moreover, management
accounting information is crucial for firm in achieving desired information by which costs can be controlled
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REFERENCES
Books and Journals
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Hospitality and Tourism Management. 28. pp.11-19.
Jobson, J. D., 2012. Applied multivariate data analysis: volume II: Categorical and Multivariate Methods. Springer Science &
Business Media.
Mak, A. H., and et.al., 2012. Factors influencing tourist food consumption. International Journal of Hospitality Management. 31(3).
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Petrova, P. and Hristov, D., 2016. Collaborative management and planning of urban heritage tourism: Public sector
perspective. International Journal of Tourism Research. 18(1). pp.1-9.
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Şen Küpeli, T., Koc, B. and Hassan, A., 2017. Understanding religion-based tourism terminology in the context of the hotel
industry. Anatolia. pp.1-15.
Song, H., and et.al., 2012. Tourism economics research: A review and assessment. Annals of Tourism Research. 39(3). pp.1653-1682.
Standing, C., Tang-Taye, J. P. and Boyer, M., 2014. The impact of the Internet in travel and tourism: A research review 2001–
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Vieira do Nascimento, D., 2016. Exploring climate finance for tourism adaptation development: an overview. Worldwide Hospitality
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ONLINE
Financial Statements, 2018. [Online]. Available through :<https://www.accountingtools.com/articles/2017/5/10/financial-statements>.
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