Report Finance & Funding in Travel & Tourism Sector

Added on - 21 Jul 2020

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Finance and Funding intravel and tourism sector
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Importance of cost and volume in financial management...................................................11.2 Analyse various pricing methods.........................................................................................31.3 Factors that influence profit of travel and tourism business.................................................4TASK 2............................................................................................................................................5Covered in PPT...........................................................................................................................5TASK 3............................................................................................................................................53.1 Interpret financial accounts of Dalata Hotel Group plc........................................................5TASK 4..........................................................................................................................................13Covered in Poster......................................................................................................................13CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONFinance is the elixir which helps in formulation of a new business entity and allows it totake grab opportunities for accomplishing goals and objectives of the company. The strategic useof financial statements, like investment and loans are the key factors of growth and success ofevery business entity. In addition, financial trends also refers the states of global economy so thatcentral banks can plan appropriate monetary policy. Beside this, the business of travel andtourism is liable for providing tourism facilities to clients; it entails travel sites, world heritagesites, tourist sports etc. Thus, access to these destinations travel infrastructure should beimmigrated by having attractive facilities like accommodations or guest houses (Buhalis andDarcy, 2011). In order to manage such activities, travelling companies have to manage theirfunds or financial sources. Apart from this, the coursework is going to cover several topics like –importance of costs in financial management. There will be discussion on pricing methods thatare used by managers of travelling industry. The another part of the report will cover tools andtechniques of management accounting and how it aids in decision making process of the firm.TASK 11.1 Importance of cost and volume in financial managementFinancial managementis about planning, controlling and managing all monetaryactivities of the company, i.e. buying and selling in order to achieve desired future outcomes. Ithelps in raising wealth and emphasis on generating value for money. Along with this, theconcept of financial management is applied to cope the cash inflows and outflows fromorganisation. In simple words, it can be said that its a management of all financial activities so asto attain financial objectives (Choi and Turk, 2011). For sustaining high competitive edge,several travelling companies are tend to increasing its funds and their effective utilisation so as toperform all functions adequately. These are key outcomes of financial management, such as-generating cash, create wealth and provide higher returns on investments as to bearing all futurerisks.Carnival Corporation Plc is one of the growing cruise company; it also deals in providingtravel leisure. The organisation has a fleet of approx 100 vessels over 10 cruise brands. It wasfounded in 1972 and now operates worldwide. In addition, the overall revenue of CarnivalCorporation Plc is US$16.389 billion. The prime objective of the firm is to deliver best qualityservices to people to retain their interest for long time of span. It is essential for the organisation1
to offer best travelling services to target audiences in this manner they have to manage theirproduction costs.Costs –Cost entails with those expenses that occurs in the operation of financialactivities. The value of money is the cost and it highly affect the overall business organisation(Evans, Stonehouse and Campbell, 2012). Costs helps in managing financial balance;management of Carnival Corporation Plc requires to determine the actual cost of goods for saleas it is assistive in decision making process. There is describe various types of costs that aredefined as under: -Direct cost– This cost is directly attributed in the production process. Direct costs helpsin evaluating inventories; it vary from the volume of manufacturing are charged fromcustomers who consumed such products. The stock value is the total of direct material,labour and all manufacturing cost.Indirect cost– Indirect cost as same as fixed cost; it does not related with number ofoutputs. In a manufacturing plant, indirect cost involve managerial remuneration, factorysupplies, indirect labour, utilises, taxes, depreciation on building, patent expenses andfactory rent.Volume– Carnival Corporation Plc has operated over the globe, different tools andtechnique are used by it to evaluate the volume of tours packages that are able to generate higherproficiency, i.e. break even point and EOQ (Gibson, Kaplanidou and Kang, 2012). It isfundamental for management to consider the volumes of business before strategic decisionmaking. In addition, tourism is like seasonal business because people go to holidays only onsummer and winter vacations. In this manner, business volume helps companies to formulatevarious strategies and controlling costs in an effective manner.Business volume includes thesetwo aspects, such as-Break even analysis– It is assistive in identifying the point of from where Dalata Hotelgroup Plc can recover all incurred costs. Break even analysis helps to earn higher level ofprofits so as to meet out desired future outcomes.Cost profit volume analysis– CPV determines the major reasons behind changes in costsand volume that will hinder the operating income of the company as well. In this,different consumptions are created like – sales price, variable costs, total fixed cost etc.2
1.2 Analyse various pricing methodsTourism business is one of the largest sector that is growing rapidly. The sector hasvarious sources of income generation which also supports the economic condition of the country.In order to survive at market place, business owners are required to manage their pricing policiesso as to increasing sales and profit margins. The pricing policy is depend on the production costwhich earns higher proficiency for it. Along with this, pricing methods are used by companiesto set prices of offering products and services (Henderson, 2010). While deciding prices, it isessential for management have to recognise market trends and customers income level whetherthey are capable to consume such services or not. It also supports in accomplishment of highercompetitive edge in a minimum time of span.There are so many rivals in the market who have set up their price differently and providechanges in the number of torus packages as below.BasisPricing of the tours packagesNumber of tours packagesMerlin Entertainment Plc£ 500- £150025- 35 orders per yearMartin Randall travel£1500- £ 250055 orders per yearDalata Hotel group Plc£ 200 - £ 1000150 orders per yearTherefore, to compete with such competitors Dalata Hotel group Plc can adopt thesepricing policies that are described as under: -Cost plus pricing method– Management acquire this method to give prices to tourpackages. It evaluates costs including indirect and direct expenses, then add profitsmargins into it.Seasonal pricing– In this, travelling companies set price of their offerings as per theseasons. For example- people usually prefer to visit in summers. Thus, the prices oftourism products is increased in summer whereas it reduces in winters.Market led pricing method– In this, business can penetrate as well as skimming theprices as per the market situation. Basically, the strategy is used to opt numerouscustomers by reducing the prices (Heung, Kucukusta and Song, 2011).Return on investment– Travelling companies like Dalata Hotel group Plc used thismethod to gain higher returns on their investments which they have made throughoffering tour packages to customers.3
1.3 Factors that influence profit of travel and tourism businessProfits concern with end result of working activities that occurred in an organisation.Managers are require to consider past profit margins in order to raise future profitability of thecompany. Profits margins provides right direction to operational activities and also aids thedecision making process. It is also beneficial in cost control and develop market policies andstrategies so as to expand at global level. Along with this, the overall business of travel andtourism is rely upon higher profits as it makes them economically strong. But in over dynamicenvironment there are several factors that can affect the profitability of the tourism business(John and Susan, 2015). The brief description of all these influencing elements is explained asunder: -Bed debts–Bed debts can be rise when debtors of the firm do not pay the amount offacilities which they consumed by the firm. For instance- when payment is not made bycustomers or clients then such amounts become bed debts are charged as a loss amount infinancial statements. Thus if tourism company have lots of bad debts then it reduce theirprofitability in an adverse manner.Tourism season-Attraction of a destination is based upon the number of tourist whocome at there whereas individuals plan their tours on vacations. In peak season, CarnivalCorporation Plc can higher profits by its operational activities and get a chance to expand theirfunctional area. Beside this, in off season firms cannot get adequate sales. Thus, changes inbusiness volumes hinders profit margin of the company (Koutra and Edwards, 2012).Terrorism– It is the most imperative factor that hamper earning capabilities of businessorganisations. Due to increasing terrorism or robbery activities in UK, people does not prefer togo there. Through, tourism associations cannot get sufficient funds to run their functionssmoothly.Political stability– If government of UK increased charges on respective activities, i.e.import or export then it is too difficult for Carnival Corporation Plc to manage its profits andsales revenues. On the other hand, if political parties are unstable and industry has good relationswith it it is accessible in business expansion at global level.Climate –UK has pleasant or clam environment which always carry out customers'interest and in this case study the mentioned tourism industry operates in Europe. This it is ableto gain adequate profits in a minimum time frame (Ma and Hassink, 2014). On the other hand, if4
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