Tourism Industry Analysis and Management

The assignment delves into the complexities of the tourism industry by examining critical performance indicators, analyzing the role of the public sector in fostering tourism investment, and investigating various pricing strategies employed within the sector. It further explores the significance of management accounting information in supporting effective decision-making for tourism businesses.

Finance and Funding in the
Travel and Tourism

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of costs, volume and profit for management decision making in Carnival
Corporation & plc...................................................................................................................1
1.2 Analysis of pricing methods.............................................................................................3
1.3 Analyse the factors which can influence the profit for Carnival Corporation & plc.......6
TASK 2............................................................................................................................................7
2.1 Types of management accounting information................................................................7
2.2 ..........................................................................................................................................7
TASK 3............................................................................................................................................7
3.1 Travel and tourism financial accounts..............................................................................7
TASK 4..........................................................................................................................................16
4.1 Sources and distribution of funding...............................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Funding is the process by which a government or company converts its short term, fixed
interest debts into long term, fixed interest debts. In the tour and travel business, they require
fund for their business to expand their business in many locations. This present report is based on
Carnival Corporation & plc which is located in London. It is the largest leisure travel company
with portfolio of cruise brands in North America, Europe and Australia. In this report importance
of costs and volume in financial management and analysis of pricing method are covered. Other
than that, different types of management accounting information, and sources and distribution of
funding are discussed.
TASK 1
1.1 Importance of costs, volume and profit for management decision making in Carnival
Corporation & plc
Direct expenses: It implies for the one which are related to production of goods or
services. In other words, it can be depicted that direct expenses are attributable to the production
related activities. It is very effective and important cost in the tour and travel business. Direct
costs is important, because In this cost only direct expenses are calculated.
Indirect expenses: Such kind of expenses is not highly related to production but
company has to incur the same for ensuring smooth functioning of operations. Indirect cost also
play the important role in the investment and finance. In this cost, another expenses calculated by
the organisation. Indirect expenses include followings:
Fixed cost: This cost includes rent, salaries of personnel etc which remains fixed at each
level of production. Such cost or expense does not fluctuate as per the level of output.
Variable cost:It varies in accordance with the changes take place in the production level
such as material, labor etc. Variable cost is based on change of the business. If they requirement
some new planning then variable cost will be apply in the company. There are lots of employees
and department work together, and company invest in entire department. They provide them
salary and it is the allocation cost in the company (Tribe, 2015). It is also very important cost In
the organisation which can arranged by the different types of finance sources. This all cost are
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very useful in the organisation, because they need to invest in the business. If they want to
expand their business in another locations, then they should use some effective cost for
investment in the business. When any company can not able to invest their fund in such types of
costs then they will not be able to expand their business in another locations. Tour and travel
business need more fund expand their business in different areas.
Break even analysis: Such analysis or evaluation helps in ascertaining the position of no
profit and loss. This in turn provides information to company about the units it needs to be sold
for recovering expenses incurred. By applying following formula company can assess BEP such
as:
Break-even point (in units): Fixed cost / selling price per unit – variable cost PU
Break even analysis entails the calculation and examination of the margin of safety for an
entity based on the revenues collected and associated costs. Through this analysis business
employee can analyse about the different price level relating to various levels of demand. It is
very useful analysis which can be used by the organisation. If they want tom expand their
business in many areas, then they should make a planning for break even analysis. When in the
tour and travel business, they invest their fund, they should analysis bout the economies of scale.
In this system, they can produce more goods for their customers, so they will be able to decrease
their cost in the company. It is very important that, their business cost will be reduce. When
company will be able to reduce their cost then they can expand their business in any locations in
the world. In the Carnival Corporation & plc, lots of employees and department are working, but
company need lots of fund to handle them. So they can arrange the fund for their employees and
department. When they arrange the fund for them, they can face some problems like
diseconomies of scale. In this problem, they can lose their employees. When people are not
going to coordinate with each another then this problem will create in the organisation. It's also
the very effective system for Carnival Corporation & plc organisation in the market. His all
volume are very useful in the company. When organisation use these costs and volume in their
business, they will be able to manage their financial system and employees in the company.
Employees coordination is very important in the Carnival Corporation & plc, because if they are
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not able to do in this activity, then they can leave their job and company can lose their best
employee from the company.
Cost-Volume-Profit Analysis:
It is the type of analysis In which there is the finding of the cost and volume in relation to
break even point. In the tour and travel business, finance play the very important role. If they
want to establish their business in the market, then they should have very well planning for their
business. In the business, main requirement is finance and fund, so they should arrange the fund
and finance from different types of sources. When they start their business, they should to invest
some cost in business.
Contribution:
Each and every travel and tourism organisation establish their business, because they all
want to profit from their business. So, they are using some effective planning for their enterprise.
Profit is very critical thing in the business, because if they will not be bale to get it, then they can
not run their business appropriate. They should follow some effective pricing methods to achieve
profit. There are lots of pricing method in the business, and that are cost led, market led, cost
plus, pricing contribution etc. This all methods play the vital role in the Carnival Corporation &
plc.
Marginal and Absorption costing
Other than that, they can use absorption and marginal costing process for their
organisation, because both costing methods are very useful in the company. It help in increasing
profitability In the business.
1.2 Analysis of pricing methods
Each and every company can only survive when it earns profit from the cost spent
on the goods and services of the business. There are different types of pricing method in the
organisation. They can use any of the method for effective price. Each and every organisation
should set their product's prices according to market trend, other than that, they can set their price
according to people or customers who will use the products or services of the Carnival
Corporation & plc.
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Cost led and oriented pricing method:- In this pricing method certain margin is include
to the cost that enables to derive the profit from the business operations. This method is very
simple and easy to understand entire profit method of the company (Johnston and Whitmore,
2015). Through is, their employee can know about the upcoming profitability of the enterprise.
Cost plus and market oriented pricing method:- This is very useful pricing method in
the Carnival Corporation & plc organisation. When they produce their goods and services, then
they set their price above the cost of the goods and services, so they will be able to get effective
profit from the products and services which provided to the entire customers. In the market
oriented method, price is determined as per the competition of the competitors. There are
numbers of competitors in the market, and they have effective pricing strategies for their
products and services. So, Carnival Corporation & plc should use some more effective pricing
method for beat another companies in the market. If they want to beat another competitor from
the market, then they should analysis entire market, and then they can set their price according to
make and customers. Prices of products and service should be affordable for the customers who
cannot able to survive in this planet.
Hence, considering overall evaluation, it is suggested to Carnival Group that it needs to
lay focus on undertaking competitive pricing strategy. On the basis of such strategy company
should offer discounts to the customers during non-peak season. Along with this, at the time of
vacations firm should set prices in line with the competitors. This in turn helps firm in attracting
customers and thereby contributes in profit margin.
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Cost plus pricing
It is also the effective method in the business order to achieve more profit from the
business, they use cost plus pricing and through it, they set their price according to their cost
(Ylli, 2016). Then they will be able to get their target and goals from the entire market. Every
company want invest in their business and earn from more profit. The main reason for making a
profit is expanded their business in different locations. Another reason is that, through profit they
can easily run their business in the market. Other than that, every person need money to survive
in the world, so they need some effective profit from the business.
Seasonal variation and political environment
It is very affect-able factor for the enterprise. People usually use the thing according to season, so
it will be advantage and disadvantage for the Carnival Corporation & plc. When season,
government, economic trends and social environment, and current trend will be change, then
5
Illustration 1: Pricing method
(Sources : Pricing method, 2018)

business profit also will be change according to it. Profit is depended on this entire circumstances
of the environment.
1.3 Analyse the factors which can influence the profit for Carnival Corporation & plc
Profit is the part of earning, when people invest their fund In the business, they profit is
an outcome of their investment. There are different types of business in the market, but travels
and tourism business is the very profitable business in the market. There are lots of factors
which can be affected on the business.
Seasonal variations:- There are different types of season in the global like winter, summer
and rain. This all season can affect to the company's profit. In the winter time, there are lots of
things which can be beneficial for the organisation. In this time people want to visit some hot
places, so they can reduce cold from that place. In the global, there are lots of places for visit
according to season. The most disadvantages get by the company from rainy season, because in
that season, people cannot visit any place easily (Bangwayo-Skeete and Skeete, 2017).
However, this is not beneficial for the Carnival Corporation & plc. When season will be change,
company should change their policies, places for visit and prices of their services.
Political environment:- In the other states or countries in the world, there are different
government. So it is very critical for travel and tourism business. Every place and country has
different rules and regulation, and other than that, they all follow the different lows of the
government. However, when they want to expand their business in another locations, they face
lots of problems from political environment of that place. One of the biggest part of this factor is
tax, because it is the main reason for lower profit of the business. Through it, they cannot
decrease their expenses in the enterprise. In the political environment, lots of changes happen
according to requirement of the government, and it entire factors effect on the profit of the
Carnival Corporation & plc.
Economic environment:- Company's almost profit is based on this factor, because if
economy of any country will be good, then their business will be good. Through it, interest rate,
foreign exchange rate and share market rates can be changed. When it will be change, then
company can face some problems form it. Economy is very biggest factor of the entire business.
Social environment:- In this world, lot of people are living and they belong from different
types of religious. So, it will be very critical to analysis of every religion. When people but the
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services of the Carnival Corporation & plc, then people will examine about the services and
another company;s services (Pricing methods, 2018). If they get the effective services from the
Carnival Corporation & plc, the will start the mouth to mouth marketing in the entire market. So,
this marketing activity is very important for the company. Through it people will be attract from
the Carnival Corporation & plc, and want to buy the services of the company. They will visit
from the organisation and get lots of fun from the package of the travels and tourism agency.
Current trend and bad debts:- When any travel and tourism company provide the services
according to current trend then people can buy the services of Carnival Corporation & plc. If the
company are not able to provide such types of services, they will not beat the competitors in the
market. They should get the knowledge and information of current trend, and try to provide the
entire services according to current trend. In the organisation, they can face the problem of bad
debts, because some customers can not able to pay their outstanding amount. Through company
cannot get the more profit and their profit will be decrease in the business (Management
accounting information, 2018). So it is very critical and bad thing for the company. It can be the
reason of lower profit of the Carnival Corporation & plc.
Planning: The strong and efficient decision will be helpful to the entity in terms of having
the better operational activities. In relation with this it can be said that the professionals at
Carnival Corporation Plc must have appropriate planning and strategies that will have profitable
gains to the entity.
Staff: It will be beneficial as the numbers of employees are sufficient to meet the operational
objectives of entity. There is need to plan the availability of numbers of staff members which
will be effective in the seasonal time when there are large numbers of clients.
TASK 2
2.1 Types of management accounting information
Enclosed in PPT
2.2
Enclosed in PPT
7

TASK 3
3.1 Travel and tourism financial accounts
Financial analysis of Dalata Hotel Group Plc.
8

9

10

11

12

13

14

Interest
coverage ratio
EBIT
Interest expenses
22
10
2.2 35
8
4.38 In relation
with the
interest
coverage
15

ratio of the
entity it
can be
said that in
the current
year the
firm is
giving
appropriat
e return
over
investment
s
Working capital
efficiency
Current assets
Current liabilities
162
57
2.84 99
69
1.43 In
compariso
n with the
last year
current is
the
liquidity
of firm is
poor.
Equity to asset
ratio
Total equity
Total assets
537
861
0.62 620
1040
0.59 In the
current
year the
equity to
asset ratio
is more
adequate
and
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beneficial.
Earning per
share
Net-income – preferred
dividends
Weighted average
common shares
outstanding
0.14 0.19 The rate of
shares has
been
increased
in the
current
year.
Cash flow statement:- In this financial accounts they include accounting personnel, who
require to understand whether the company will be able to cover payroll and another immediate
expenses. In this statements, they can know about the creditor and potential leaders. Other than
that, their investors, who require to examine whether the organisation is financially sound.
Trading account:- In this account, they can make a report of the entire trading of the
business. Through trading account, they can know the figure of sales, purchases and return.
There are numbers of investors in the organisation, and they are selling their services in lot of
market, so they need to know that which are the beneficial part of their company (Ndivo and
Manyara, 2016). Further, they can make a training account for the organisation and able to take
appropriate action according to trading account. Entire assets which are used by the company
and liabilities of the organisation can cover in the trading account.
Measure financial performance:-
Current ratio:- It is calculated by diving current assets to the current liability. Through
this system, they can know the capacity of the organisation to pay its short as long term debt. It is
one of the effective and simple process to examine the aspects of the organisation. Through it,
company can able to pay their outstanding amount to their creditors. In the year 2015 the current
ratio of the organisation was 2.842 while in 2016 it was 1.435.
Profitability ratio:- This is one of the important factor or the company. This ratio
determines the ability of the enterprise in relation to the capacity to earn profit from the cost that
17

is incurred for this matter (Maloletko and Gladko, 2014). Through it, company can know about
their profitability factors and make a strategy for increasing their profitability in the business.
In the travel and tourism company, it is very necessary to know about the performance of
the company. They can know their capacity from the customers through their feedback. This
entire activities are very beneficial for the company, but if they will not understand the
requirement of the customers, then they cannot able to get their target and goals. So, they should
get the feedback of their valuable customers, and provide them better services, so they can start
the mouth to mouth marketing In the market and thorough it companies can increase their brand
value and profitability in the business (Gurtner, 2016.).
Return on capital employed: This is the ration which helps in ascertaining the
proportionate amount of return has been paid by the professionals to the shareholders of the
organisation as per their invested capital. Thus, it can be said that there will be need of making
increment in revenue generation which will be through reducing the overheads and various costs
to balance the profit gains and which will improve the dividends to be payable to the
shareholders of the organisation. Therefore, in the year 2015 the ROCE of Dalata Hotel Group
was 0.089 while in 2016 it was 0.108.
Financial Statements:
In accordance with the financial performance of the firm the records of all the
transactional activities in data set will be summarized into several statements however, it will be
known as the income statements, balance sheet, cash flows and the statements of changes in the
shareholder's equity. These are the financial instrument which ascertains the financial position
and efficiency of the business in meeting the targeted goals in the required duration. In
accordance with the Dalata Hotel Group it can be said that, in the last year the financial
performance of entity was remarkable while in the current year there has been downfall in their
operational ability.
TASK 4
4.1 Sources and distribution of funding
Enclosed in leaflet.
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CONCLUSION
In this present report it has been recognised about the importance of the costs and volume
in financial management of travel and tourism business. Other than that, it is concluded about the
factor which is influencing profit for the same industry and requirement of management
accounting information system for the travel and tourism organisation. Along with this, it also
concluded about the importance of management accounting information in the decision making
and sources and distribution of funding for the development.
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REFERENCES
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