Finance and Funding in the Travel and Tourism Sector

This report discusses the finance and funding in the travel and tourism sector, focusing on the significance of costs and volume in financial management of Carnival Corporation & plc. It also explores different types of pricing methods used by the company and various factors influencing profit for Carnival Corporation & plc.

Finance and Funding in the
Travel and Tourism Sector

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of costs and volume in financial management of Carnival Corporation & plc
................................................................................................................................................1
1.2 Different types of pricing methods used in the Carnival Corporation & plc...................3
1.3 Various kind of factor that influencing profit for Carnival Corporation & plc................4
TASK 2............................................................................................................................................5
Covered in PPT.......................................................................................................................5
TASK 3............................................................................................................................................5
3.1 Interpret travel and tourism financial accounts in travel and tourism businesses............5
TASK 4..........................................................................................................................................13
Covered in Leaflet................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance is the basic need of business entity that assist in performing all activities and functions
routinely. Funding can be identifying as an act of giving financial resources, mainly in the term
of money and other values such as time or effort, to finance a program, project and need which is
used by a government and organisation (Buhalis and Darcy, 2011). The finance and funding in
travel and tourism industry is growing at a fast speed with aim to acquire knowledge of the
different concepts related to the financial performance and condition of the firm.
This report is based on two different organisations, including Dalata Hotel Group plc and
Carnival Corporation & plc. Main objective of this project is to provide a better chance for the
learner in order to evaluate duty of finance and the aspect of profit, cost and volume. Different
kind of pricing method which is also shown in this study. There are different types of factor that
highly influence profitability and sales in the tourism industry that identified. Types and
importance of management information help the manager in the decision making process.
Sources and distribution of funding is essential and significant factor for the development of
business capital, it is also describing in this assignment.
TASK 1
1.1 Significance of costs and volume in financial management of Carnival Corporation & plc
Carnival Corporation & plc is the biggest leisure travel and tourism company in all over the
world. It was founded by Ted Arison in 1972. Main aim and motive of this organisation is to
provide quick services to the visitors in an effective and efficient manner. In the company, there
are approx. 120,000 employees are work with each other. Objective of company is to offer
quality services to their potentials and target clients at reasonable cost (Choi and Turk, 2011).
Finance is a main factor of the each and every organisation because all activities and functions of
company is depending on sufficient money.
Financial management: It is mainly related with development and arrangement of capital
in the business operation and activities of Carnival Corporation & plc. It is deliberated that
tourism sector is involved of different cost and expanses is needed to be earned for the progress
of trip packages for customer at large.
1

Cost of the tourism industry is very essential term for decide the price of the holiday
package for the traveller. Company using different kind of factors in regards to create effective
judgement in its business organisations. All these factors are describing as below:
Cost: It is related with entire expanses or sales for evolving a determined holiday packages
for the customers. However, an organisation has been acquiring some kind of expanses for rising
customer’s oriented travel and tour packages. In this different types of cost are highly included
which are determined as below:
Fixed cost: In nature this kind of cost is fix and help Carnival Corporation & plc in reducing
entire cost of trip (Evans, Stonehouse and Campbell, 2012). Usually, it is covered of agreement
payment to merchant, lighting expanses and further more.
Variable cost: In nature entire cost is variable and changes in the number of customer’s in
Carnival Corporation & plc such as recruiting new workers, expanses of tourist destination,
hiring accommodation and cabs services.
Direct cost: It is mainly connected with direct sales and expanses over the facilities
provided by the company in tourism industry holiday packages to visitors such as food, hotels,
spas and further more.
Indirect cost: It is connected with the indirect sale made on another organisation activities
of company such as hiring professional, expenses on promotion & advertisement and emerging
portals for the tourists.
Volume: Carnival Corporation & plc, it is a travel and tourism industry in United
Kingdom. It is a famous and popular company in all over the world. It has been offering its
services and facilities worldwide (Gibson, Kaplanidou and Kang, 2012). There are large number
of techniques and tools which is followed by enterprise to mainframe the ideal volume holiday
trip that generates maximum profit such as Breakeven point, EOQ, etc. These are calculated with
the assist of available turnover and stock in the allotted time period.
Profits: It is identifying as a one of the essential and important factor that identify the
business growth and development in competitive marketplace. Each and every business
organisation work with earning more provide and revenues as well as achieving log term goals
and objectives in limited time period. It is the volume of variances which is calculated by
reducing cost of the trip from the income received by business entity.
Importance and significance of profit, cost volume of Carnival Corporation & plc
2

Cost Volume Profit Appropriation
 It assists the
company in
order to
decrees its tour
packages cost.
 It is very
essential to
attract large
number of the
tourist for visit
different
destination
happily.
 With the
maximum
volume level,
business entity
could simply
cut the price of
tour package
(Henderson,
2010).
 In the same it
also supports
Carnival
Corporation &
plc to
maximise its
profit and
sales in
determined
method.
 It is the main
and essential
factor of the
each and every
organisation.
 It assists the
business entity
to plug back
total fund in
the company
and gives
needed
amount of
capital for the
development
of the business
operation and
functions.
 It is another
important
factor which is
mainly
connected
with
dissemination
of costs in
whole
procedure of
the company
in order to
calculate per
unit price of
tour packages.
 It help the
manager in
order to
increase sales
and revenue of
the company
in limited time
period.
1.2 Different types of pricing methods used in the Carnival Corporation & plc
Travel and tourism sector is growing and developing quickly in this fast moving world. Large
number of the traveller are visiting different destination, travelling all over the world and are
following internet sites for making the advance booking (Heung, Kucukusta and Song, 2011).
This sector is significant for all the nations because it carries the fund and the enlargement to the
countries.
3

There is a big necessity of the marketing philosophies for selecting the tourism pricing
method according to the star rating, location and brand which are offered to the accommodation
services. Pricing strategy play a very essential role in fixing the reasonable price so that sensible
amount of turnover can be received.
Selling price of the tour package can be identified by adding the margin of profit in the
profit and cost margin that should be appropriate so that the company can success and enlarge in
the future. There are different methods of pricing which are used by the Carnival Corporation &
plc for fixing the amount in the tourism industry. All pricing approaches are describing as below:
Market led pricing: In this tool, prices are fix as per the skimming and penetration pricing
strategy. Penetration pricing method, it is used where the cost of the trip is set at lesser level so
that maximum clients become attracted and the enterprise can battle the strong struggle in
marketplace (John and Susan, 2015). On the other hand, skimming pricing is also another
important method of pricing, it is follow where the company set more charges because they are
equipped at a strong point in marketplace and have competitive benefits over the other industry.
Profit led pricing: Under this approach, there are two pricing strategies including, pricing
based on customers and competitions pricing. Both are essential and important strategy for the
company to gain higher profit as compare to other firm. Competition pricing method are fix as
per the charges of the challengers. Another approach of prices is based on clients; it fixes the
charges as per the demand of customers.
Return on investment pricing method: It is also another useful approach where the prices
are identified as per the IRR method (Interest rate and return on the investment).
Cost led pricing method: In this approach charges of the tour packages are set as per the
volume and cost of the company. In this BEP (Breakeven point) is measured so that the Carnival
Corporation & plc can get accurate returns on their outlay on organisation and when any kind of
enterprise fixes its charges above the BEP, it means that maximum level of turnover is achieved
by the company.
Business profit and return are handled when the process of pricing is done in an effective and
efficient manner (Ma and Hassink, 2014). Maximum amount of profits is got if the pricing
activity is completed after charging some factors such as breakeven point, profit margin, cost etc.
4

1.3 Various kind of factor that influencing profit for Carnival Corporation & plc
Carnival Corporation & plc has some influencing aspects which has been effecting its
business
operations and functions in a negative and positive manners in determined method. Still in
regards to analysis the profit and return for the company, so they should measure following
factors which are determined as below:
Seasonable variation: This factor mainly related with variation in the business seasons. It
is perceived that profit and revenue of the organisation are reliant on the business turnover. In
the time of season, business entity saw that firm has progressive reactions from the customers.
Economic environment: It is related with entire factor of economic such as macro and micro
(Morrison, 2013). This factor saw that profit of business is hinge on the buying power of
customers, political changes, market conditions, social preferences, technology use and other
aspects as may be observed.
Political environment: This actor mainly concerned with government framework and
policies about with the tourism industry. It is noted that Carnival Corporation & plc would draw
maximum profit and revenue if there is minimum involvement made by legal authority either in
international and national business.
Current trend: During the time period with the maximising variation in the working
environment highly effects of tourism industry. In this business organisation saw that profit of
the firm is effected by the common tendency of the community. If person is having latest trend of
travel innovative destination, then there will be maximum revenue to the business entity and
vice-versa (Koutra and Edwards, 2012).
TASK 2
Covered in PPT
TASK 3
3.1 Interpret travel and tourism financial accounts in travel and tourism businesses
Financial account includes various documents of the company financial statement. All these
are determining as below:
Cash flow statement: It is very important and essential part of the business organisation because
it displays entire cash which can arrived or leftover of the enterprise. It divided into three parts,
5

one is business operations or activities where the cash outflow and inflow due to operational
function recorded. Another is investment, it includes entire information or data connecting to
capitalizing activities like buying fixed assets (Spencer and Zembani, 2011). Last part is
including financial activities such as long term bank loans. There are also some essential cash
activities which are classified to the investor is also preserved in this segment.
Trading account: P&L and trading account are part of the income statement. It is identifying as
a primary phase of final account which give entire information and data regarding gross loss and
profit (Spenceley, 2012). It is also containing all information about services, cost of goods sold,
credit sales etc.
Profit and loss account: It is identifying as a part of income statement which includes all
information regarding business income and expenses. It gives net loss and profit to the all
stockholders who are working in the Dalata Hotel Group Plc. This data is given for a specific
period of accounting and including various elements like legal expenses, office rent, salary etc.
Balance sheet: It is one of the main and necessary which is prepared by each and every
organisation in daily basis. It displays financial position of the enterprise for a specific
accounting period (REPORTS, RESULTS AND PRESENTATIONS, 2016). Entire records of
business liabilities and assets are extant in it and stability is this text is engaged from record book
or ledger account.
6

7

8

9

10

Calculation of Dalata’s financial performance:
Current ratio: This kind of ratio determined by allocating current assets upon current liabilities.
S in this scenario, CR of Dalata Hotels is 1.44 in year 2014, it was increase by 2.89 in 2015. This
data displays the figure of their actual assets has minimised in proration to the real liability. In
2016, current assets were 98771 pounds in comparison to 2015 was 162278. On the other hand,
current liabilities were 68821 in 2016 and in next year it was 56238. So it is identifying as it not
makes long term judgement but they can be followed at the period of short term decision making
(Tribe, 2015). Need of Dalata is to work on enhancing such ratio because they are expert to
execute more superior than this. Current ratio of the company:
Current ratio
2015 2.89
2016 1.44
Acid test ratio: This type of ratio is measured by detecting stock from current assets and
rest of the amount is divided by actual liability of company. In 2016, business amount of this
ratio is 1.41. It is does not a bid condition from them but as an assessment to past time
enactment, they fail to achieve same growth and development. In year 2015, such ratio was 2.86
which is identify as a remarkable situation of organisation.
Acid test ratio
2015 2.86
2016 1.41
Return on capital employed: In year 2015, such ratio was 5.82 which decrease in next year by
4.98. It is measured by likening operating income from capital employed. This is identifying as a
profitability ratio which help the business entity to increase their profit in the accurate field. In
2016, such ratio of Dalata is 4.98 which was increase by 5.82 in next year. During the period of
time this ratio has minimised but quiet it is better (Vanhove, 2011).
11

Return on capital Employed
2015 5.82
2016 4.98
Return on net assets: Working capital are assets are important part of the business
organisation. This ratio exposes the efficiency and effectiveness on an enterprise in handling
these two essential things. This amount is calculated by isolating net profit of a company by
fixed assets and working capital. In 2016, such ratio of company was 3.78 which was increase by
0.04 in next year (Vanhove, 2011). This display that are expending their working capital and
fixed assets in much significant manner equated to past year.
Return on net assets
2015 3.74
2016 3.78
Net profit ratio: 2015 – 9.58, 2016 – 12.02, This kind of ratio is established by
distributing net income from total sales. In 2016, such ratio of Dalata was 12.02, it was good in
year 2015 because it is 9.58. This type of ratio gives entire data regarding operational activities
and functions of business.
Net profit ratio
2015 9.58
2016 12.02
Stock Turnover ratio: In year 2016 - 69.40, 2015 – 89.50, This kind of ratio determine
regarding the replaced and sold stock (Von der Weppen and Cochrane, 2012). Calculation of
such ratio is allocating Cost of goods sold (COGS) from average stock of a specific time period.
Stock Turnover ratio
2015 89.50
2016 69.40
12

TASK 4
Covered in Leaflet
CONCLUSION
As per the above mentioned report, it can be concluded that finance is a necessary and
essential part of the business success and development. With the support of accurate fun and
capital company do their all activities and functions in an easy manner. Different types of costs
and volume are important for the company to attract million number of clients towards visiting in
various destination. Various type of pricing method is used by the company with aim of
influencing large number of the clients and achieving maximum amount of profit as compare to
another tourism industry. There are different factors that effects on business profits and revenues
such as Seasonable variation, Economic environment, Political environment, Current trend etc.
all these are highly effects on business performance and profitability in a direct way.
Management accounting information is very essential and significant part of the manager to take
effective decision in achievement of long term goals and objectives of company. Sources and
distribution of funding are necessary for the organisation to do their all functions and activities in
an appropriate manner.
13

REFERENCES
Book and Journals
Buhalis, D. and Darcy, S. eds., 2011. Accessible tourism: Concepts and issues (Vol. 45).
Channel View Publications.
Choi, H.C. and Turk, E.S., 2011. Sustainability indicators for managing community tourism. In
Quality-of-life community indicators for parks, recreation and tourism management (pp.
115-140). Springer, Dordrecht.
Evans, N., Stonehouse, G. and Campbell, D., 2012. Strategic management for travel and
tourism. Taylor & Francis.
Gibson, H.J., Kaplanidou, K. and Kang, S.J., 2012. Small-scale event sport tourism: A case study
in sustainable tourism. Sport management review.15(2). pp.160-170.
Henderson, J.C., 2010. Sharia-compliant hotels. Tourism and Hospitality Research.10(3).
pp.246-254.
Heung, V.C., Kucukusta, D. and Song, H., 2011. Medical tourism development in Hong Kong:
An assessment of the barriers. Tourism Management.32(5). pp.995-1005.
John, S. and Susan, H., 2015. Business travel and tourism.
Ma, M. and Hassink, R., 2014. Path dependence and tourism area development: the case of
Guilin, China. Tourism Geographies. 16(4). pp.580-597.
Morrison, A.M., 2013. Marketing and managing tourism destinations. Routledge.
Koutra, C. and Edwards, J., 2012. Capacity building through socially responsible tourism
development: A Ghanaian case study. Journal of travel research. 51(6). pp.779-792.
Spenceley, A. ed., 2012. Responsible tourism: Critical issues for conservation and development.
Routledge.
Spencer, J.P. and Zembani, P., 2011. An analysis of a national strategic framework to promote
tourism, leisure, sport and recreation in South Africa: tourism, leisure, sport and
recreation. African Journal for Physical Health Education, Recreation and Dance.
17(2). pp.201-218.
Tribe, J., 2015. The economics of recreation, leisure and tourism. Routledge.
Vanhove, N., 2011. The economics of tourism destinations. Routledge.
14

Von der Weppen, J. and Cochrane, J., 2012. Social enterprises in tourism: An exploratory study
of operational models and success factors. Journal of Sustainable Tourism. 20(3).
pp.497-511.
Online
REPORTS, RESULTS AND PRESENTATIONS. 2016. [Online]. Available through;
<http://dalatahotelgroup.com/investors/reports-and-presentations/?date=2017>.
15