Finance and Funding In Travel And Tourism Sector Finance And Funding In Travel And Tourism Sector

Running head: FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Finance and Funding in Travel and Tourism Sector
Name of the Student:
Name of the University:
Author’s Note

1
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Table of Contents
Task 1...............................................................................................................................................2
Introduction..................................................................................................................................2
Importance of Cost and Volume in Tourism Industry.................................................................3
Analysis of the Pricing Strategies................................................................................................3
Factors Affecting the Profitability of Tourism Industry..............................................................6
Conclusion...................................................................................................................................7
Task 2...............................................................................................................................................7
Types of Management Accounting Tool in Tourism Business...................................................7
Application of Management Information System in decision Making Process..........................9
Task 3.............................................................................................................................................10
Analysis of Financial Performance of Fulham Shore plc..........................................................10
Task 4.............................................................................................................................................15
Reference.......................................................................................................................................16

2
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Task 1
Introduction
The main purpose of this assessment is to analyse the business of Carnival Corporation &
plc for the purpose of establishing the relevance of cost and volume analysis in decisions making
process for the business. The assessment would also be discussing about the pricing strategies
which are followed for different brand of Carnival Corporation & plc. In addition to this, the
factors which can affect the profitability of the business is an important consideration for the
management of the company while taking major decisions for the business.
Importance of Cost and Volume in Tourism Industry
In recent times, the tourism industry has been flourishing as more and more people are
travelling to different tourist attraction place. In such a situation, the business of Carnival
Corporation & plc. The analysis of cost and volume analysis is undertaken by the management of
the company for the purpose of computing the breakeven which the business needs to consider
for the purpose of taking any decisions (Mauri 2016). The cost and volume analysis help the
business to take major decisions which are very important such as number of customers that the
business needs to serve, the scale of operations which the management should undertake (Pulido-
Fernández, Andrades-Caldito and Sánchez-Rivero 2015). In other words, CVP analysis allows
the management to take all major decisions regarding the financial matters of the business. The
cost and volume analysis allow the management to decide a breakeven point on the basis of
which decide at what level of operations is to be carried out by the management of the company
(Georgiev 2014). In addition to this, effective decisions can be taken regarding the variable and
fixed costs elements which are to be considered for the assessment. The computation process

3
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
which is considered for the analysis of breakeven as well as cost and volume analysis is quite
simple and easily interpretable by all.
In case of tourism industry, the costs are quite significant and entirely depends on the
volume of the services which is provided to the customers of the business. Therefore, it can be
said that this has an impact on the revenue, sales and profits which are generated by the industry.
Analysis of the Pricing Strategies
The pricing strategies in any business framework is significantly important as they
represent the value which is offered by the product in monetary terms. In addition to this, the
pricing strategies are formulated considering the totals costs which is incurred for the product
and also some profit element which the business wishes to earn (Phx.corporate-ir.net. 2019). In a
tourism industry, the main product which is on offer is tourism package for some exotic place
which includes all necessary services. There are a variety of pricing techniques which are
available in the market such as market-oriented pricing strategies, cost oriented pricing strategies
and several others pricing strategies.
The pricing strategy which is generally used in a tourism industry are explained below in
details:
 Cost-Based Method: The cost-based method considers the service average costs on
which a margin of profit is added to get the price at which the product will be offered to
the client. In some situations, as well, the businesses also tend to use breakeven analysis
for determining the prices of the products which is to be offered to the customers (Sahut
and Hikkerova 2014). Some of the Businesses also utilizes marginal pricing approach for
the purpose of determining the prices of the products which is to be offered to the client.

4
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
In this approach the prices are set below total and variable costs and this strategy only
tends to cover marginal costs.
 Competition Based Method: In this method, the prices for the products which is offer is
determined considering the competitor’s prices and also on the basis of the market’s
average price (Han and Hyun 2015). The decision to take the prices which can be above
the prices of the competitors or below the prices of the competitors is solely the decision
of the management.
 Demand Based Pricing Method: This is another method for setting prices of the products
and the same is based on the demand for the product which is offer. This pricing strategy
considers the value which is provided by the product and on the basis of the same the
prices are set.
Figure 1: Image showing linkage between pricing strategies and firms performance
Source: (Diva-portal.org. 2019)
In case of Carnivals Corporation and plc, the management of the company uses demand-
based pricing techniques more effectively prices are set as per the value of the brands which is

5
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
on offer to the customers. Some of the top-level brands in cruise line for Carnivals Corporation
and plc are premium operator Holland America Line, the luxury brand Seabourn and other
brands as well. An example can be given for premium operator Holland America Line in case of
pricing strategies (Diva-portal.org. 2019). The brand is offered at a price which reflects the value
of the product and the prices are not kept too low as the level of services which is provided by
the brand is of highest quality and is regarded to have once in a lifetime experience for the
customers. In case of luxury brand Seabourn, the prices for the products are on the basis of
market situation and competitor’s prices. This means that the prices are set as per the peak
season, demand of customers and competitive pressure. The brand depends on full capacity of
the cruise so prices are kept flexible.
Factors Affecting the Profitability of Tourism Industry
The management strategies which are adopted by businesses are effectively tools so as to
ensure that the profitability of the business can be maintained effectively by the business. There
are various factors which have an impact on the profitability of the business and the same needs
to be considered by the management of the company before taking any major decisions for the
business. The factors which have an impact on the tourism industry and also considering the
business of Carnivals Corporation and plc are given below in details:
 Demand for the Product: The main product which is offered by tourism businesses is the
main thing which attracts the customers. In the case of Carnivals Corporation and plc, the
demand for the cruise brand are immense and the profits which is generated by the
business is largely depended on the demand for the product which is offered by the
business (Alegre and Sard 2015).

6
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
 Price of the Product: The price which is charged for the product is an important
determinant which affects the profitability of the business and therefore the same should
be selected in such a way that the profits can be maintained as well as customers are still
interested in the tour packages on offer.
 Advertisement and Promotion: The advertisement and promotion for the products which
are undertaken by the businesses providing tour packages is an important determining
point which can affect the business’s profitability. In the case of Carnivals Corporation
and plc, the management of the company extensively promote advertisement as each and
every brand of the company has its own marketing and sales team such as premium
operator Holland America and even luxury brand Seabourn.
Conclusion
The above discussion effectively shows that the business of Carnivals Corporation and
plc is well established and considers the cost volume analysis as an important factor in
determining the prices of the products and the profit generating capacity of the product. The
assessment considers the premium cruise line brands which are premium operator Holland
America and even luxury brand Seabourn for identifying the factors which affect their
profitability and pricing strategies which are followed for such brands.

7
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Task 2
Types of Management Accounting Tool in Tourism Business
Management accounting is the process with the help of which the senior management of
a business can take major decisions regarding the business. In management accounting certain
reports and tools are used for the purpose of taking major decisions for the business. In case of a
tourism industry as well management accounting tools can be crucial and quite advantageous for
taking major decisions of the business (Tsai et al. 2015). The analysis considers the business of
Fulham Shore plc which is engaged in the business of restaurants and food chain and has primary
operations in UK. Some of the management accounting tools which can be used by the business are
discussed below in details:
 Budgeting: The management of the company can utilize budgeting techniques for the
purpose of planning, forecasting and controlling of expenses of the business. In addition
to this, budgets can be used for setting targets and reviewing the performance of the
business on the basis of the targets which are set by the management of the company. The
management of Fulham Shore plc would benefit from such a practice as this would enable
them to make plans for future and effectively help them to recognize the expected costs and
revenue of the business.
 Cost Allocation Reports: The management of the company can use cost allocation reports
for the purpose of understanding the allocation of costs to different activities of the
business. In the case of Fulham Shore plc, there are various overhead expenses which needs
to be treated in an effective manner and therefore cost allocation reports are generated so that
the treatment of the costs takes place in an efficient manner.

8
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
 Standard Costing Report: In most of the businesses, budgets are used along with
standard costing technique for the purpose of maintaining control over the operations of
the business and ensure that the operations are carried out as per the plan of the
management. The management of Fulham Shore plc can use such a technique for
identifying the variances between the budgeted targets and the actual results and thereby
investigate the causes for the same. This would improve the structure of the business
effectively.
Application of Management Information System in decision Making Process
In todays world, the significance of management accounting system has enhanced
significantly as more and more businesses operating in different industries are adopting the same
for making the business structure more efficient. The important business decisions are taken with
the help of different management accounting tools and the same are discussed below in details:
 Different types of Budgets: The management of the company can use different types of
budgets for the purpose of take decisions on different aspects of the business. The
management can also apply budgeting practice for the purpose of planning for revenue
and expenses of the business. The budgets can also be used for the purpose of controlling
the activities of the business.
 Costing Reports: The management of the company can apply different costing
approaches for the purpose of preparing cost reports which can be used efficiently for the
purpose of taking vital decisions for the business. In case of Fulham Shore plc, the
management can use the cost records for the purpose of planning to minimise the same so
that the profitability of the business can be enhanced.

9
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
 Benchmarking: The management of the company can take vital decisions considering
the technique of benchmarking which allows a business to consider the practices of a
competitor and implement the sane in their own business. This is a policy which can be
effectively used by the management of Fulham Shore plc for taking all major decisions of
the business.

10
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Task 3
Analysis of Financial Performance of Fulham Shore plc
The analysis of the financial performance of Fulham Shore plc would be done for the
period of 2018 and 2017 and the same would be done applying ratio analysis tools. The key financial
ratios of the business would appropriately depict performance of the business relating to different key
areas of the business such as profitability, solvency, liquidity and efficiency (Fulhamshore.com.
2019). The key financial ratios are computed considering the annual report of the business for the
year 2018 and the same is presented in the table below:
Profitability Ratios
Figure 2: Table showing Profitability Ratios
Source: (Created by the Author)
The above table depicts the profitability ratios of the business which includes net profit
margin, return on equity and assets. The analysis shows that the profits which is earned by the

11
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
business has significantly declined during the period. The return on assets and return on equity of
the business are considered to be important indicators for overall success of a business but the
same is shown to be negative which is not a positive sign for the business. The management of
the company needs to consider the same and take appropriate steps for the purpose of improving
the financial position of the business and thereby also meet the expectations of the shareholders.
Liquidity Ratios
Figure 3: Table showing Liquidity Ratios
Source: (Created by the Author)
The above table shows liquidity ratio of the business and represents how well the
company can manage its current obligations of the business. The current ratio and quick ratio are
important indicators showing liquidity situation of the business and the same is shown to have
improved significantly during the period (Delen, Kuzey and Uyar 2013). The cash ratio of the
business is also shown to be appropriate. The above results also signify that the current assets of

12
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
the business has increased from the estimates of 2017. The management of the company needs to
take further actions for improving the financial structure of the business.
Solvency Ratios
Figure 4: Table showing Solvency Ratios
Source: (Created by the Author)
The solvency ratio of the business represents the capital which is used by the business for
undertaking activities of the business. In case of Fulham Shore plc, the management has enhanced
the application of debts in the management of the company. The above table shows that the
management has changed the capital structure of the business (Kou, Peng and Wang 2014). The
equity ratio shows a slight decline which confirms that the management of the company has made
changes in the capital structure of the business.
Efficiency Ratio

13
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Figure 5: Table showing Efficiency Ratio
Source: (Created by the Author)
The above table shows efficiency ratio of Fulham Shore plc, which is shown be improving.
The management of the company has enhanced total asset turnover ratio slightly which suggest that
the management is trying to improve the business structure (Ongore and Kusa 2013). However,
further changes can be made by the management and the same needs to be considered. The
receivable turnover ratio shows a slight decline which signifies that the management has made
changes in the debtor’s policy during the period.
On the basis of the ratios which are computed and discussed above, it can be said that the
management of the company needs to focus on profitability of the business which can be done by
effective management of the costs of the business. The management also needs to improve the
efficiency of the business by developing innovative business strategies.

14
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Task 4
In a tourism business, the management needs to take care of the needs of the clients
which includes housing, foods, tour places and other services which all forms part of a tour
package. There is a definite need for investing in capital projects such as the hotels, resorts and
amenities which can add more value to the tour packages. These are the factors which affect the
earning capacity of a tourism business (Joshi et al. 2013). The sources of funds which can be
utilized by businesses for meeting the needs for capital projects and the same are listed below:
 Debt Capital: The businesses have an option of utilizing debt capital for the purpose of
financing the needs of capital projects. The management can effectively apply for debts
and take loans for meeting the obligations of the projects. It is the fast way accumulating
the funds. Company would only require paying fixed rate of interest to carry out the loan.
 Equity Capital: The management of company can also opt for equity share capital which
can be accumulated by issue of shares by the business. This is the most preferred method
for businesses as it does not create any burden on the management of the company. The
serviceability of equity capital is also low which therefore makes it a best alternative.
The above mention sources are the two most prominent sources through which management
of companies can acquire capital. The capital which are acquired from such sources are then
invested in the capital projects which is being undertaken by the management of the company.

15
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Reference
Alegre, J. and Sard, M., 2015. When demand drops and prices rise. Tourist packages in the
Balearic Islands during the economic crisis. Tourism Management, 46, pp.375-385.
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A
decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Diva-portal.org. (2019). [online] Available at:
http://www.diva-portal.org/smash/get/diva2:731192/FULLTEXT02 [Accessed 19 Feb. 2019].
Fulhamshore.com. (2019). [online] Available at:
http://www.fulhamshore.com/wp-content/uploads/2018/08/FS_2018.pdf [Accessed 19 Feb.
2019].
Georgiev, D., 2014. Application of ‘Cost-Volume-Profit’Analysis in the Hotel Industry Based on
Survey Data of High-Ranking Hotels in the North-East Region of Bulgaria.
Han, H. and Hyun, S.S., 2015. Customer retention in the medical tourism industry: Impact of
quality, satisfaction, trust, and price reasonableness. Tourism Management, 46, pp.20-29.
Joshi, M., Cahill, D., Sidhu, J. and Kansal, M., 2013. Intellectual capital and financial
performance: an evaluation of the Australian financial sector. Journal of intellectual
capital, 14(2), pp.264-285.
Kou, G., Peng, Y. and Wang, G., 2014. Evaluation of clustering algorithms for financial risk
analysis using MCDM methods. Information Sciences, 275, pp.1-12.

16
FINANCE AND FUNDING IN TRAVEL AND TOURISM SECTOR
Mauri, A.G., 2016. Pricing and revenue management in hotel chains. The Routledge Handbook
of Hotel Chain Management, pp.262-273.
Ongore, V.O. and Kusa, G.B., 2013. Determinants of financial performance of commercial banks
in Kenya. International journal of economics and financial issues, 3(1), pp.237-252.
Phx.corporate-ir.net. (2019). Our Brands - Carnival Corporation. [online] Available at:
http://phx.corporate-ir.net/phoenix.zhtml?c=200767&p=irol-products [Accessed 19 Feb. 2019].
Pulido-Fernández, J.I., Andrades-Caldito, L. and Sánchez-Rivero, M., 2015. Is sustainable
tourism an obstacle to the economic performance of the tourism industry? Evidence from an
international empirical study. Journal of Sustainable Tourism, 23(1), pp.47-64.
Sahut, J.M. and Hikkerova, L., 2014. The impact of internet on pricing strategies in the tourism
industry. The Journal of Internet Banking and Commerce, 14(1), pp.1-8.
Tsai, C.Y., Horng, J.S., Liu, C.H. and Hu, D.C., 2015. Work environment and atmosphere: The
role of organizational support in the creativity performance of tourism and hospitality
organizations. International Journal of Hospitality Management, 46, pp.26-35.