Financial Management in Tours and Travel Business - Desklib

Tours and travel business
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Tours and travel business
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Table of Contents
Introduction................................................................................................................................3
Task-1.........................................................................................................................................4
P1.1 Explain the imperativeness of cost, volume in financial management of travel and tours
industry using Tours and travel business?.................................................................................4
P1.2 Analysing the pricing methods of The Akaglo Tours Company (ATC)...........................5
P1.3 Analysing the factors affecting the profit of ATC on the holiday trip?.............................6
Task-2.........................................................................................................................................9
P2.1 Explain the different types of management accounting information that could be used in
ATC?..........................................................................................................................................9
P2.1 Assess the use of investment appraisal techniques as decision-making tools in ATC?....9
Task-3.......................................................................................................................................11
P3.1 Interpret travel and tourism financial accounts................................................................11
Ratio formula...........................................................................................................................14
Power point presentation..........................................................................................................15
Final results..........................................................................................................................17
Task-4.......................................................................................................................................19
P.4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism........................................................................................................19
Conclusion................................................................................................................................20
References................................................................................................................................21

Tours and travel business
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Tours and travel business
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Introduction
In this report, pricing strategy, ratio analysis tool and cost-volume-profit analysis have
been taken into consideration. The main focus of this company to evaluate the whether the
pricing strategy implemented and financial performance of ATC company is effective or not.

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Task-1
P1.1 Explain the imperativeness of cost, volume in financial management of travel and
tours industry using Tours and travel business?
In order to determine the tours and travel packages, cost plays an imprint role. The
cost of the tours and travel packages is accompanied by the direct, indirect, variable and fixed
cost.
Direct cost Indirect cost Variable cost Fixed cost
The cost which is directly
related to the tour
expenses.
Example- payment to
labour and staffs
The cost which is not
directly related but as
much important as direct
cost.
Example- Payment for
advertisement.
It is the cost which varies
with the changes in total
revenue of the company.
Example- tours operation
units
It is the cost which is
fixed in nature and
does not vary with the
increased units.
Example- Supply chain
cost
Lighting and contract
expenses.
CPV analysis of ATC
 It establishes the relationship between cost-volume and profit of the company.
 The CPV analysis is used to lower down the cost of tour packages and
increase the return on capital employed (Chen, Tsai, & Liu, 2018).
Importance of cost in the financial management decision making
It helps in determining the break-even point of the business.
It assists in reducing the overall price of the tours and travel packages.
It is also used to pre-determine the profit of the business.
Importance of volume or tours and travel packages units in the financial management
decision making
 It is used to determine the contribution per units of the total sales units.
 It helps in determination of the margin of safety of the business.

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P1.2 Analysing the pricing methods of The Akaglo Tours Company (ATC)
The pricing strategy is used to increase the overall profitability of the company. There are
several pricing strategies which are given as below.
Market leading pricing strategy
Penetration pricing strategy- This strategy is used to penetrate the market with the low
price of tours and travel packages.
Price skimming strategy- This pricing skimming strategy is used by branded tours and
Travel Company to sell its high-quality packages at the high price.
Profit-oriented pricing strategy
Rival based pricing Client’s based pricing
In this pricing strategy, the price of the tours and travel
packages is set as per the rivals offering (Dalata,
Carnival, TUI group)
This pricing strategy is followed to increase the
overall market share by keeping the price of the tours
and travel low.
Return based pricing strategy
This pricing strategy is used to earn the stipulated profit from the business.
Costing based pricing
This pricing strategy is followed to sell the tours and travel operations at very low cost.
However, there are several companies which have followed different pricing strategy (Jacob,
2017).
Name of the company Price setting methods
Carnival Corporation Customer-based pricing
Dalata Penetration strategy
TUI Skimming strategy
Other small tours operators Cost leading pricing strategy