Finance and Funding in Travel Tourism Sector Assignment
Added on 2020-06-06
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Finance and Funding in Travel and Tourism Sector
TABLE OF CONTENTSINTRODUCTION......................................................................................................................3TASK 1......................................................................................................................................31.1 Explaining the importance of cost and volume in the context of financial managementpertaining to Carnival Corporation & plc..............................................................................31.2 Analyzing pricing methods that can be used under travel and tourism...........................41.3 Assessing factors that affect profit margin of travel and tourism businesses..................5TASK 2......................................................................................................................................6TASK 3......................................................................................................................................63.1 Interpreting financial statements of Dalata Hotel Group Plc for the year ended on 2015& 2016....................................................................................................................................6CONCLUSION........................................................................................................................11REFERENCES.........................................................................................................................13
INTRODUCTION In the current times, travel and tourism industry of UK is growing significantly andmakes remarkable contribution in the economic growth & development. Thus, for attractinghigh tourism companies operating in such sector needs to make focus on the aspects ofeffective financial management. This in turn enables firms to invest funds in the innovativepractices and achieve success by influencing more visitors. The present report is based on thecase situation of Carnival Corporation & Plc which is recognized as the world’s largestleisure travel company. Such business unit has built and maintained effectual portfolio ofcruise brands in several areas such as North America, Europe and Australia. In this, reportwill entail the manner in which cost and volume aid in financial management. Further, reportwill shed light on the factors which have an impact on the profitability of travel and tourismunits. It also provides information about the extent to which financial position Dalata hotelhas improved over the time frame.TASK 11.1 Explaining the importance of cost and volume in the context of financial managementpertaining to Carnival Corporation & plc For the purpose of effective financial management company must have informationabout cost aspect. Determination of cost is highly significant which in turn further assistsCarnival Corporation & Plc in setting suitable prices. Specifically, there are mainly two typesof costs which business unit incur for ensuring smooth functioning of the business operationsand function such as:Direct cost: Carnival Corporation & Plc incurs several direct costs for managingbusiness operations such as raw material, hotel rents etc. Hence, it refers to the expendituresthat are completely attributable to the production of specific products or services (Moutinhoand Vargas-Sanchez, 2018).Indirect cost: This cost is not directly attributable to the object or particular functionbut business unit has to incur the same for ensuring smooth functioning of operations. Hence,indirect expenses can be further divided into two parts such as fixed and variable in thefollowing manner:
Fixed cost: It implies for the one that remains fixed at each output level. In otherwords, fixed cost is the one that does not change with an increase or decrease in thelevel of output produced or offered. Hence, fixed costs associated with the CarnivalCorporation & Plc include promotional expenses, salaries of personnel etc. Variable cost: Such cost includes expenses that vary as per the level of input. On theincrease in the number of services offered such cost enhances to the significant level(Titman, Keown and Martin, 2017). In the context of Carnival Corporation & Plc,variable cost includes promotional, administration as well as selling & distributionexpenses.Cost and volume are the main elements that ensure effective financial management inthe travel and tourism sector. Both such factors are inversely related with each other whichmean cost level decreases on the incline in volume. Hence, by doing break-even analysistravel firm can assess the number of tour packages that it needs to plan for attaining thesituation of no profit and loss (Burtonshaw-Gunn, 2017). Besides this, CVP analysis alsoprovides high level of assistance in determining the number of customers or individuals towhom tour package needs to be offered for getting the desired level of profit margin. Apartfrom this, when travel companies including Carnival Corporation & Plc operate at large levelthen it gets high economies of scale. Moreover, business unit gets discount and enjoysreduction which takes place in fixed cost when tour packages are offered to the large numberof customers. Thus, Carnival Corporation & Plc should make focus on enhancing volumewhich in turn helps in enhancing the level of profit margin. 1.2 Analyzing pricing methods that can be used under travel and tourism Price determination is highly significant and required in the case of profit makingbusiness unit. Moreover, price includes both costs of services and profit margin that firmwants to earn via its offering. Hence, there are several method that can be used by CarnivalCorporation & Plc for setting appropriate prices of the offerings such as:Cost-plus pricing method: This is one of the simplest methods that CC Plc canemploy for price determination. On the basis of such pricing method, company needsto assess unit cost of offerings. By dividing total expenses from number of offeringsunit cost can be determined (Long and Shi, 2017). Hence, by adding desired profitmargin, pertaining to each customer, CC Plc can set suitable price.
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