Finance & Funding in Travel and Tourism Sector Assignment

Added on - Dec 2020

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FINANCE AND FUNDING IN TRAVELAND TOURISM
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................31.1. Significance of cost and volume in tourism and travels financial management............31.2 Pricing techniques used in Carnival Corporation & plc...................................................3P1.3 Factor affecting travel and tourism industry profit........................................................42.1 Various cost accounting information uses in travelling and tourism industry.................52.2 Decision making in tourism and Travelling industry with the help of managerialaccounting:.............................................................................................................................63.1 The Fulham Shore plc's financial account........................................................................74.1 Distribution and sources of funding in tourism industry..................................................8CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12APPENDIX....................................................................................................................................13Income statement of Fulham Shore plc's..............................................................................13Balance sheet of Fulham Shore plc's....................................................................................13
INTRODUCTIONFinancial management includes all the decision and activities regarding fund arrangement and its best utilization in business. It comprisesplanning, managing, organizing and controlling the financial and activities. Management accounting is the technique to manage the businessesaccount and preparing different report, which assist manager to take different financial and non-financial decision. This report will cover, factoraffecting the pricing and profits in tourism industry. Report will also describe various pricing techniques and importance of different accountingmanagement techniques in business decision making inCarnival Corporation & plc. Interpretation of financial accounts and ratio ofThe FulhamShore plc isalso given. Report also will look upon the diverse sources of funds in tourism industry.Carnival Corporation plc is one of thebiggest traveling cruise operator having net income of 17.5 billion in financial year2017 (Revenue of Carnival Corporation plc ,2018). TheFulham Shore plc possess and run restaurants in UK.1.1. Significance of cost and volume in tourism and travels financial managementCost- Volume Profit analysisThis cost accounting technique measures the effect of cost and volume on operating expenditure. It determines the break-even point fordifferent level of contrasting sale quantity and cost composition. It compares different dimensions like cost profit, number of sold goods regardsto Break-even point. CVP also have some assumption like fixed cost will be indifferent with production of same volume. If there is any changeoccurred in production expense, it will come only due to changes in activities quantity (Arowolo and et.al., 2016). For tourism and tour industryfixed cost is related with rent for accommodation, insurance, salary to employee and fixed wages. Variable cost includes advertisement andpromotion cost, fair charges, trade events, marketing research expenses, seasonal expenses etc.importance of CVP analysis for CarnivalCorporation & plc is given below:CVP helps in identify the quantity of product and service required to gain desired profit.It helps manager to Foresting and predict the sale, with the help of graph's movement.Company can decide efficient and reasonable price for the service, which help in earning sufficient profit margin, because CVP renderthe cost details. So, Carnival Corporation & plc can use these cost related information for pricing decision. Like company can changeextra amount for value addition, but it can be only possible when it actually knows the cost of added value.Cost controlling can be done with the of CVS, as company get to know impact of changes in volume and cost on profit.Fixed cost of organisation can be determined from CVP. This calculation render facility of measure the cost structure of particularcompany. Cost structure indicates the ratio of variable and fixed expenses. Manager use cost structure in pricing and profit decision. Forinstance, if Carnival Corporation & plc has high fixed cost, then its fixed sale has to be high (Borodin and et.al., 2015). Elevated sales,indicate higher break-even point as well. These indicates the business success and growth.Level of volume for expected result, render the idea of required cost. Cost assumption facilitate capital budgeting decision.Income tax planning for various service within one organisation can be done via CVP as tax rate can be feed in CVP tool software, whichgives the amount of taxes for different profit amount and sale volume.1.2 Pricing techniques used in Carnival Corporation & plcAn organization cannot rely only on one pricing policy especially in Tourism industry because cost of the service gets fluctuated bymany variables factors . Also, Carnival Corporation and plc has to make many marketing effort, to gain competitor advantage and increasedshare market (Chandra, 2017). Factor affecting pricing of tourism industry are: cost of the product, Product life cycle, Economic conditions,Competition in market, firm's image in customer's mind, product's goal, government control, and organisation objective and so on. Apart fromthese general factor, tourism and travelling industry's prices also affected by seasonality, Commissions to distributor, last Minute pricing, rackrate. Pricing approaches uses by Carnival Corporation and plc are given below:Cost oriented pricing:In this pricing policy, Carnival Corporation & plc and Norwegian Cruise Line add up the desired profit margin in cost. Cost orientedpricing can be divided into two parts such as mark-up pricing and cost plus pricing. In cost plus pricing, fix percentage is added in cost. Where inmark-up pricing, a fix percentage cost is taken in deciding the profit margin.Economy PricingIt is used by company when it wants to attract more customer in short time span, in depressive economic phase and for medium incomelevel group. Visitor have to pay comparatively less price to enjoy travelling service of firm. (D'Onza, Greco and Allegrini, 2016).To giveeconomical pricing to customer, Firm has to lower its non- required expenses and cut down marketing efforts. So that, Clint can avail the serviceon a reasonable price. Royal Caribbean International also use this pricing even after having Royal in its name.3
Bundle pricingIn tourism industry, bundle pricing can be seen as tourism packages. Company render bunch of product and service in one quoted prices.This pricing strategy is best for the tourism industry because different complimentary product and service required to customer at the time ofconsumption of one tourism service. For instance, nowadays tour packages include accommodation, event, sports, adventures, meal andtransportation service too. It is become trend that people chooses that traveller, who offer kind of services in one package. Tour facilitators notonly arrange hotel to stay, even they design events (b'day, ceremony and business meetings) on the behalf of Clint.Disney Cruise Line also haveattracting tour package for different customer segment.Psychological pricingHere, companies tries to grab the customer's attention quickly. Prices are set to induce emotional decision in people, in place of logicaldecision making. Like Carnival Corporation & plc put £199 in place of £200, which is an eye catching pricing offer for people.Premium pricingItis used by Carnival Corporation & plc to offer unique services, which are not given by its competitor to customer. Firm charges higheramount for these packages. It is also done to impress high income level group. People tend to think high pricing service has more value thannormal services. Company also try to get advantage of this psychology of consumer (DeAngelo and Stulz, 2015). Company even change itsmarketing mix to target high class people. Like Carnival Corporation & plc put its high pricing tour advertisement on newspaper and websiteswhich are mostly used by high income people. Princess Cruises also use premium pricing for some product.P1.3 Factor affecting travel and tourism industry profitProfit of any business is impacted not only by general elements, but also by industry specific considerations. Following are thedeterminants of tour and travelling profit:Seasonality:Carnival Corporation & plc earns high profit margin in peak time, in compare to off season. Like on the occasion of New Year andChristmas people have enough time to plan holiday, which also increase sale of company. Large sale volume enhances the higher profitabilitychances.Currency exchange rate:Outbound tour normally gets influenced by change in currency value, If value of domestic currency (Carnival Corporation and plc'shome country) is higher than host country, than it will facilitate profit, conversely, lower rate of domestic currency can shrink the profit margin.Cost of distribution:Tourism organisation purchase service from wholesaler and retailer. Wholesaler render bulk of service in lower price (Gadenne, 2017). IfCarnival Corporation & plc's purchase services direct from mass tour operator and sale direct to its customer, then company can maintain decentprofit margin, where if it acquires service from retailer (individual) and sale to customer, it can lower the profit margin too.Competitor policy:Carnival Corporation & plc's has to remain itself competitively competence in industry. It also has to offer services and facilities which aregiven by its rivalry on same price. In case competitor offering more service and good quality product option, than company also has to offer thesame. These additional service raise the cost and minimise the profit.4
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