Finance and Funding in Travel and Tourism: A Comprehensive Analysis

This report delves into the crucial role of finance and funding in the travel and tourism industry. It examines the importance of costs, volume, and profit for management decision-making, using Carnival Corporation & plc as a case study. The report further explores the use of management accounting information as a decision-making tool, focusing on Dalata Hotel Group plc. By analyzing financial accounts and examining sources and distribution of funding for public and non-public tourism development, this report provides a comprehensive understanding of the financial landscape of the travel and tourism sector.

Finance and Funding in Travel and Tourism
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Contents
Introduction....................................................................................................................................3
Task 1..............................................................................................................................................4
LO1- Understand the importance of costs, volume and profit for management decision
making in travel and tourism.......................................................................................................4
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study...........................4
P1.2 analyze pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc................6
P1.3 analyze factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study..............................................................7
Task 2..............................................................................................................................................8
LO2- Understand the use of management accounting information as a decision-making tool
in travel and tourism businesses...................................................................................................8
P2.1 Explain different types of management accounting information that could be used
in travel and tourism businesses using Dalata Hotel Group plc as your case study............8
P2.2 Assess the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc..............................................................................................................8
Task 3............................................................................................................................................10
LO3 Be able to interpret financial accounts to assist decision making in travel and tourism
businesses......................................................................................................................................10
3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2016 showing at least two years performance.....................................................10
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Task 4............................................................................................................................................15
LO4 Understand sources and distribution of funding for public and non-public tourism
development..................................................................................................................................15
4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism...........................................................................................................15
Conclusion....................................................................................................................................17
References.....................................................................................................................................18
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Introduction
This is being introduced from the report that for the travel and tourism business it is very
necessary that pricing must be corrected so the customers cannot go for the competitors and try
to meet the expenses of the company. In travel and tourism business the strategy of pricing
method must be made according to the business and its competitors. This report also denotes the
increase of capital, investments and their budgets and also signifies their support to the
management. Managing accounts along with financial & income statements of the hotel Dalata
hotel group is must and needs to be taken care while preparing them.
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Task 1
LO1- Understand the importance of costs, volume, and profit for management decision
making in travel and tourism
Carnival Corporation, the American based world largest company in the field of travel leisure. It
has over 100 ships under ten cruise liner brands. Carnival employees over 120 thousand workers,
it handle over 11.5 million customers in a year (Rahimi and Kozak, 2017). The company
currently handling 25 ships and the largest ship can handle almost four thousand passengers.
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.
Carnival Corporation have to manage the cost and volume for the finance and funding the
various cost which could be involve in travel and tourism sector for financial management are
 Operating cost: operating cost are the costs which involve in various operations and
providing services of any business. The operation cost consist of two fragment
Fixed cost: fixed cost is the cost whose value do not change when the volume of the
production and services changes. In travel and tourism sector fixed cost could be
insurance, rent, equipment etc. (Timothy, 2017).
Variable costs: It contains the costs whose value changes with change in the amount of
production and services. The various examples of variable costs are wages of worker,
electricity and gas consumption in serving the customers, marketing cost, cost on
maintenance.
 Direct costs: the cost which are directly involve in manufacturing, production, providing
services etc.it include various cost like cost came in paying salary to the worker, cost
came in buying material and tool, for hiring labors, for consultant.
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 Indirect costs: Indirect costs are the cost which do not directly contribute in the cost but
can contribute in the cost of the product and services. It includes cost of transportation,
office cost, distribution cost, selling cost, security cost, administration cost.
 Allocation and apportionment cost: In this type of costing technique the cost of
expenditure of service is shared among various streams that were funding it.
Volume of any production or service refers to the number of customer to be cover to fulfill the
goal of the firms. It consist of various analysis which decide the cost of product like (Rahimi and
Kozak, 2017):
 Break-even analysis: The break-even analysis shows the profit margin of the firm. It
tells what number of total volume of services and products to be sale to acquire a profit
margin over the total cost spend in providing services and products (Timothy, 2017). The
price of the product is decided on the basis of break-even analysis,
 Economies of sales: It means that the cost of product is depend on amount of production,
if the production rate is high then the cost of the product will going to decrease.
 Diseconomies of sales: If the firm is growing at the rapid rate then it will also affect the
cost of the product.
Importance of volume and cost for Carnival Corporation for financial management in travel and
tourism (Veretekhina, et. al., 2017).
 To decide cost of services and product: there were several factors in cost and volume
analysis which will decide the final cost of product and services.
 For decision making: the company makes it decision by analyzing the data of the cost-
volume analysis
 For making budget: cost-volume analysis is helpful for making the budget of the firm
 To increase profit: The data of cost-volume help in making efficient decision which
increases the profit of the firm.
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 For the expansion of the firm: The demand of the customer and the production rate
decides whether the firm requires expansion in its industry (Mahrous and Hassan, 2017).
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P1.2 analyze pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc.
This method is used by various corporations to decide the price of the product. The various
technique uses in pricing methods are:
 Market-based pricing: In this method price of the services and products are decided on
the basis of market demand. If demand rises then product price also rise.
 Cost-based pricing: In this method, the price of services and products are decided by
considering actual cost of that product and service.
 Cost-plus pricing: In this method, the price of services and products are decided by
adding all the cost involve in manufacturing of that product and services.
 Competition based pricing: In this method, the company changes its pricing strategy
according to the pricing strategy of its competitor in the market for the same product to
attract customer.
 Contribution pricing: In this method, the price of services and products are decided by
analyzing how much contribution does each product give to cover up the fixed cost of
production
 Top-down pricing: In this method price of services and product is decided by analyzing
the budget of the customer.
 Return on investment: In this method, the price of services and product is decided by
analyzing the rate of production, selling rate, and the profit obtain from each product.
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P1.3 Analyze factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study.
All companies in the market could only survive in competitive market if it is able to maintain its
profit margin. There were many factors which influence the profit of travel and tourism
industries, these factors are (Veretekhina, et. al., 2017):
 Seasonal variation: Various customers who were approaching the travel and tour
company are in favor of any particular environmental condition. So the customer appeal
changes for different environmental condition of the tourist destination at any particular
time. This appeal leads to variation of arrival of tourist in the calendar year.
 Political environment: The terrorism around the world is highly influencing the tourist
appeal as the customer always want to check security related issue before allocating the
holiday destination. The political relationship between two nations always decides the
amount of tourism in both nations due to each other (JOVANOVIĆ & ILIĆ, 2016).
 Economic environment: The tourist also attract from the economic growth of the
country. The number of tourist arrival in developed nation is more than that of
developing nation.
 Social environment: There were several countries which possess a friendly environment
for any tourist. This social environment attracts many tourists.
 Current trend: Various state capitals are planning various capital projects to attract
tourist. This project decides the trends in the tourism sector as tourist want to visit these
newly develop capital projects (Veretekhina, et. al., 2017).
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Task 2
LO2- Understand the use of management accounting information as a decision-making tool
in travel and tourism businesses
P2.1 Explain different types of management accounting information that could be used in
travel and tourism businesses using Dalata Hotel Group plc as your case study.
P2.2 Assess the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc.
Slide Note: This is being explained with the help of poster about the meaning of Management
Accounting System in the organization Dalata Hotel Group Ltd. The Management Accounting
System is a method which helps in collection of data used to analyze financial data. This data is
being collected by various methods (Nowduri, 2014). These methods are primary and secondary
data. The data is being collected by various methods such as budget report, financial statement,
job cost analyses and variable analyses. Management Accounting System is a method which is
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more used at the time of launching a new product and services in the market. As various steps
are being taken such as planning, collection of data, implanting the plans and analyzing the
results etc. growth of the organization is also being compared according to the last year
performance so that new strategies can be made and fresh data can be used in making strategies.
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Task 3
LO3 Be able to interpret financial accounts to assist decision making in travel and tourism
businesses
3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2016 showing at least two years performance.
Every firm manage its financial data. These data were tally by the higher official to decide the
working efficiency of the firm; these data give the brief about the financial performance of the
firm. These data came under the category of financial data. Various methods to estimate the
financial account are:
 Cash flow statement: It indicates inflow and outflow of the cash in the tourism business. It
is helpful in determining where the majority of fund is spending in the firm or from what are
the major sources of income of the firm (JOVANOVIĆ & ILIĆ, 2016). This help to check on
various process involving the cash flow. The ratios are used for the measurement of the profit
and loss of the business in the above analysis in 2016 the margin ratio is increased by 75%
from 2015 in 2016 cash ratio is 1 and in 2016 it is 3 so it shows the good performance of the
Dalata hotel group.
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 Trading account: Trading account is used to manage the trade of the business it deal with
the details of the trading of the inventories and finished products and services. It is helpful in
deciding the requirement of accessories for the firm to satisfy its consumer requirement.
 Profit and loss account: it is helpful in determining the financial performance of all the
operation on-going in the firm. It includes revenue and expenditure of any firm, the
difference in the revenue and expenditure decide the profit or loss condition.
 Balance sheet: the balance sheet of any firm contains the information of equity of
shareholders, total assets and liabilities hold by that firm. The balance sheet hold the
information of both long-term liabilities or current liabilities
The various field to measure the financial performance of Dalata hotel group are
 Current ratio: current ratio helps to determine the ability of any firm to pay its current debt.
The current assets of Dalata hotel group shows decrement in financial year 2016 from the
financial year 2015 and the current liabilities of Dalata hotel group have increase in financial
year from the financial year 2015 due to which the current ratio decreases.
 Quick ratio: it is measure of ability of the firm to meet its short-term goal with its current
liquidities. The quick assets of Dalata hotel group have decrease in financial year 2016 in
comparison to the financial year 2015 due to which the quick ratio decreases (Dalata hotel
group PLC, 2015). The quick ratio is a ratio which is used in financial accounting it is
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companies liquidity, it is also known as acid test ratio. in quick ratio, the assets includes cash
and cash equivalents, cash receivable, short-term marketable security. Quick ratio includes
only current assets.
 Current ratio: it is helpful in measuring the amount of extension in debt could any firm
hold. The Cash of Dalata hotel group have decrease in financial year 2016 in comparison to
the financial year 2015 due to which the cash ratio decreases (Dalata hotel group PLC, 2015).
current ratio is a proportion of current assets and current liabilities. If the current assets of the
company are 6, 00,000 and the current liabilities are 3, 00,000 then the current ratio will be
6:3. It includes the total amount both assets and liabilities.
 Debt ratio: It determines the amount of assets that were which are financed by the debt.
Since the total liabilities do not change much in year 2015 and 2016, the debt ratio also
remains unchanged. a debt-equity ratio is calculated by the proportion of total liabilities to
stockholders' equity. Higher debt-equity ratio influenced the risk of the company's creditors.
 Interest coverage ratio: It is the ability of the firm to pay back interest on the total
liquidities. The Interest of Dalata hotel group have decrease in financial year 2016 in
comparison to the financial year 2015 due to which the interest coverage ratio increases.
 Fixed assets turnover ratio: It shows how efficiently any firm uses its fixed assets. The
fixed assets of Dalata hotel group have increases in financial year 2016 from the financial
year 2015 and the turnover of Dalata hotel group also increase in financial year 2016 from
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the financial year 2015 due to which the fixed assets turnover ratio remain same (Dalata hotel
group PLC, 2015).
 Net-profit ratio: It helps in determining the net profit in comparison to net income. The net
profit of Dalata hotel group have increases in financial year 2016 from the financial year
2015 and the Net sales of Dalata hotel group also increase in financial year 2016 from the
financial year 2015 due to which the net profit ratio remain same.
 Gross-profit ratio: It helps in determining the gross profit in comparison to net income. The
net profit of Dalata hotel group have increases in financial year 2016 from the financial year
2015 and the gross profit of Dalata hotel group also increase in financial year 2016 from the
financial year 2015 due to which the gross profit ratio remain same (Dalata hotel group PLC,
2015).
 Return on equity: Return on equity ratio is profitability ratio, it is used for calculating the
ability of the organizations profit generation capability. But in above analysis, it is properly
shows that there is no comparison b/w the two years 2015 and 2016.
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 Equity ratio: In this types of ratios the proportion of creditors in comparison to the funds that
are invested by the company. If the equity ratio decreases or increases then it directly affects
the organization's profitability. In travel and tourism sector it may changes because of the
seasonal activities (JOVANOVIĆ & ILIĆ, 2016).
 Investment ratio: investment ratio defines that how much profit earn by the company and it is
calculated on the basis of the investment ratios. It related to all the cost which is earning by
the organization like price earnings ratio, price to sales ratio, equity ratio and so on.
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Task 4
LO4 Understand sources and distribution of funding for public and non-public tourism
development
4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism.
Description
The above leaflet describes that the Capital funds play a very crucial role in the travel and
tourism sector of the economy. There is a great need for the development and proper distribution
of the sources in the economy in order to maintain the sustainability and growth in a particular
economy. There also comes the need to determine the allocation of the resources in all the parts
of the travel and tourism industry. These areas include the railways, stadiums, attractive and
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recreational places like parks, historical buildings, etc. (Croce, et. al., 2014).
Railways: Railways plays a vital role in attracting tourists in a particular economy. This sector
is too important for the development of the tourism in the economy as tourist's needs
transportation for traveling. There should be use of the latest technology in the development of
the railways of a country. These should be innovative at the stage to attract the tourists. This
project is to be governed and funded by the central government of a particular country (Chang,
et. al., 2017).
 Stadiums: The stadiums are built and operated by both public as well as private sector in
the economy. There is the need for the development of this area because most of the
tourists love enjoying the events and event-based tourism (Vujko & Gajić, 2014).
Stadiums would be too refreshing for that lot of tourists. Though it is a large project
which requires proper funding and investment by both private enterprises as well as
government authorities.
 Parks with the themes: Nowadays, the parks are though built on theme basis. The
themes would variant on the basis of nature and operations like that of some are built for
fun, refreshing and gaming purpose, some of those are for study and technical purpose
like science and technological parks, etc. It is through a large project which requires a lot
of investment. These are too maintained in order to attract the tourists from all around the
world. The amount of investment in this totally depends on its scale like if the project is
on large scale, it would require more funds, and if that is done on small scale, then the
requirement of the capital would be less.
Historical Buildings: Most of the people all around the globe love learning more and more
about the history of a particular place. For that lot of tourist, there should be proper maintenance
of the historical buildings in the particular area. These are the main attractions of the tourists all
around the world. They get more curious to know the history of the monuments but these also
require proper maintenance and funding in order to save from damage which may occur after a
long period of time (Croce, et. al., 2014).
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Conclusion
To gain profit is always the main objective of any firm in any sector. Proper funding and capital
projects are to be also laid on the stadiums in order to attract more and more tourists to that
particular place. In this report with the help of leaflet and poster more detailed information is
being provided so that the Dalata Hotel Group can take proper steps in order to make effective
strategies. The hotel Dalata hotel group plays a dual strategy of accounting for the corporation.
Financial accounting is that field which analysis all the transaction, statements and availability of
finance. It also summarizes the information of accounts and presents them. This report represents
that there should be proper decisions taken in the organization regarding the determination of the
budget.
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References
1. Rahimi, R. and Kozak, M., 2017. Impact of customer relationship management on
customer satisfaction: The case of a budget hotel chain. Journal of Travel & Tourism
Marketing, 34(1), pp.40-51.
2. Timothy, D.J., 2017. Managing heritage and cultural tourism resources: Critical Essays,
Volume One. Routledge.
3. Mahrous, A.A., and Hassan, S.S., 2017. Achieving superior customer experience: the
travel and tourism industry of an emerging market. Journal of Travel Research, 56(8),
pp.1049-1064.
4. Veretekhina, S.V., Medvedeva, A.V., Vinichenko, M.V., Demchenko, T.S., Karyagina,
T.V. and Makushkin, S.A., 2017. Current Trends Influencing the Competitiveness of
International Tourism. Journal of Advanced Research in Law and Economics, 8(2 (24)),
pp.658-669.
5. Vujko, A., & Gajić, T., 2014. THE GOVERNMENT POLICY IMPACT ON
ECONOMIC DEVELOPMENT OF TOURISM. Economics of Agriculture, pp. 789-800
6. JOVANOVIĆ, S., & ILIĆ, I., 2016. INFRASTRUCTURE AS IMPORTANT
DETERMINANT OF TOURISM DEVELOPMENT IN THE COUNTRIES OF
SOUTHEAST EUROPE. ECO FORUM [Volume 5, Issue 1 (8), pp. 288-300.
7. Dalata hotel group PLC, 2015. About us. [online] Dalata hotel group PLC. Available at:
http://dalatahotelgroup.com/about-us/ [Accessed: 20 May 2018].
8. Nowduri, S., 2014. Management Information Systems Research for Small and Medium
Enterprises: A Sustainability Perspective. International Journal of Software Engineering
and Its Applications.
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