Tourism Industry Financial Analysis

This assignment focuses on the financial analysis of a hypothetical tourism industry business. Students are provided with an income statement for three consecutive years and tasked with interpreting the data. The analysis should involve calculating key financial ratios, identifying trends in revenue and expenses, and drawing conclusions about the business's profitability and financial health over time.

Development of a Business
Plan
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EXECUTIVE SUMMARY
A business plan is considered as the most important aspect behind success as it contains
new ideas and concepts. The current business plan is based on adding more services in RACT
destination and hiring new employees in order to deliver services to potential buyers. For this
purpose, adventurous tour package will offer a different kind of facilities or appropriate
marketing strategies. This assists management to attract more tourists and increase attention of
employees towards the same project. Here, company access cost-effective sources such as
retained profit and bank loan through which project can be started in the relatively short time
span. Apart from this, the focus will be laid on exploring skills of existing employees and
strategies are applied to retain them. In addition to this, the performance of the current business
or new project will assess by taking feedback from visitors.
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TABLE OF CONTENTS
Strategic focus..................................................................................................................................4
Aim of the business plan..............................................................................................................4
Mission.........................................................................................................................................4
Core organizational competencies 4
Organisational values 4
Highest priorities goals................................................................................................................4
THE BUSINESS..............................................................................................................................5
MARKET ANALYSIS....................................................................................................................5
PRODUCTS.....................................................................................................................................7
MARKETING..................................................................................................................................8
RESEARCH AND DEVELOPMENT............................................................................................8
PRODUCTION AND DELIVERY.................................................................................................9
SUPPLY CHAINS...........................................................................................................................9
BUSINESS SYSTEMS AND PROCESSES.................................................................................10
STAKEHOLDER RELATIONSHIPS AND ALLIANCES..........................................................10
ORGANIZATION AND MANAGEMENT .................................................................................10
ENVIRONMENTAL AND SOCIAL IMPACTS ........................................................................10
RISK FACTORS AND REGULATORY COMPLIANCE ..........................................................11
FINANCIALS................................................................................................................................12
APPLICATION OF INVESTMENT FUNDS..............................................................................12
STRATEGIC ACTION PLAN......................................................................................................12
Improvement.................................................................................................................................13
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STRATEGIC FOCUS
Aim of the business plan
The purpose of current business is to attract more buyers by including skilled and
competent personnel. For this purpose, tour packages of the adventurous trip will offer to couples
and a group of people. At this juncture, skilled and qualified workforce are hired by taking into
account different perspectives such as language, cultural barriers and other related aspects.
Mission
 To deliver excellent quality of tour services by focusing on expectations of buyers
 To cover varied and adventurous trip by taking into account specific needs of buyers
Core organisational competencies
The core competencies of current business are to shed light upon preferences and
expectations of customers. Nowadays, youngsters like to buy an adventurous trip in their holiday
package which aid to increase their enjoyment. However, the business focuses on unique
booking facilities under which at first client will send to specification related to preferences
along with budget and then holiday plan will be prepared (Wallace and Webber, 2010). For this
purpose, the skilled and competent workforce will be hired and retained. However, standard
methods such as the internet are used for attracting staff who are proficient in English, French
and Mandarin as well as many other languages. This would be effective for a corporation to
understand the specific need of buyers and provide them with a great experience.
Organizational values
The business focuses on a variety of services with the inclusion of highly skilled employees. For
this purpose, the focus is laid upon recruitment and selection procedure whereby everyday
recruitment can be done for attracting potential candidates (Finch, 2013). However, the company
inculcates cultural diversity to provide the good working environment and maintain
organisational culture.
Highest priorities goals
The top priorities goals of the business are mention as follows-
 To increase visitor by 30% until the end of 2017
 To raise tourism employment by 35% until the end of 2017
 To enhance regional visitor dispersal by 30% till the mid of 2018
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 To retain staff to a significant level at the end of 2017
THE BUSINESS
RACT destinations cover some tourist destinations such as Cradle Mountain Hotel and
Strahand Village in Tasmania as well as many more wonderful destinations. It considered as a
glorious capital city which in turn attract a number of buyers.
The corporate culture is very strong offering quality of services to a large number of
buyers. The strong service culture of business makes it possible to increase the overall rate of
return and achieve the set target on right time span (Brinckmann and Kim, 2015).
Basically, RACT destinations business activities include investment performance and
strategic direction as well as operation and financial. Along with that, tourism, motoring and
other related services are also offered by the business.
The business is situated in Hobart is the capital and considered as the most populous city
of Tasmania. Presently business is performing in a very good manner as total visitors during
2015 were 1146600 which increased in the current year to 1167900. Moreover, direct job during
2015 were 17500. It shows that customer is increasing at very slow speed.
The major strengths of current business are; good financial position and strong goodwill
in the marketplace and coverage of a large number of destinations. It can be critically evaluated
that weaknesses of business cover; low customer base and absenteeism.
MARKET ANALYSIS
Macro environment
The political situation in Australia remains stable with the inclusion of efficient and
transparent legal framework. However, equal opportunities considered as the crucial aspect
which must review by RACT destinations (The Royal Automobile Club of Tasmania Limited,
2015). Furthermore, the economic situation of Australia is also good as the rate of taxation and
interest do not vary to a great extent. It would be effective for different destinations to operate a
business successfully with increased rate of return. On the other hand, social factors such as
customer preferences and choice are also important factors which must be considered by
business (Drost and Chaney, 2014). For example, visitors of Tasmania have different preferences
towards travel and tourism. Moreover, technological innovation must be implemented by a
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business in order to secure business for longer time span. Here, RACT destinations are using
effective mode of communication with a view to render good quality of services to a large
number of buyers. Moreover, legal factors are important which prove to be effective for RACT
destination because they get full support from the government. In this regard, business need to
ensure inclusion of skilled and competent personnel who comply with states rules and
regulations (Migliori and et. al., 2014). In addition to this, environmental aspects like
preservation of tree and securing natural beauty, etc. will be considered with the introduction of
new holiday packages. It shows that new adventurous tour packages will be introduced with
greater success as all external factor tend to support the decision of business.
Industry
Travel and tourism sector of Australia are outperforming in the marketplace. It is
because during 2012-13 employment rate was 7.2% whereas industry value add is 4.3% (Sector
summary 2014, 2014). However, local employment is also increasing but with slow growth. It
might affect the performance of the business to a great extent (Alant and Bruwer, 2010).
(Source: RACT, 2016)
Markets, customers and suppliers
The market of Tasmania has several travel companies which tend to focus on tourist
destination and grab the attention of visitors. Here, local suppliers are selected who can approach
consumers. However, a business can access cost-effective sources of finance as well as other
required material for offering services.
Competitors and their products
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There are different types of products and services offered by business such as tourist
destinations, transportation and other. The major competitor of new adventurous services in
Australia includes Australia One and Council of Australia Tour Operators and Casey Australia
Tours. These different tour operators provide a variety of services which create competition for
the business.
PRODUCTS
The product portfolio for current business is to introduce new adventurous trip by hiring
skilled and competent personnel. For this purpose, on the job and off the job training will be
provided so as to increase their expertise (Hughes and Carlsen, 2010). However, the services are
delivered by targeting upon youngsters particular focus upon couple and groups. The features of
services are explained as follows-
 Customer preferences will be known in advance related to tour packages
 The current products consist of different types of travel services
 The present product will derive benefit in term of higher customer base because of
personnel with higher skills will be added for rendering services
 Adventurous trips will not have adverse impact on environment, in fact, RACT
destinations focuses on meeting demand of buyers by discovering new destinations and
developing the same
 All the regulation related to the development of tour packages and other aspects are
considered. Employees will be hired on local as well as the International basis on the basis of specific
terms and condition. This term will provide extra monetary as well as non-momentary
benefits for personnel.
Current situation
The present state of travel and tourism sector is showing a slow growth rate of visitors.
However, they issue might be related to the poor marketing of products and services because of
less skilled personnel. In this respect, a corporation can use effective strategies to attract more
buyers and increase their attention towards natural beauty of Tasmania.
Key product, strategies and market issue
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The key strategies applied for increasing sales turnover of the business is an association
of personnel who have knowledge of the diverse field. Furthermore, a key product such as
adventurous trip will be offered by them. It can be critically evaluated that, higher competition in
the marketplace might affect the performance of new services (Zeppel, 2012). This is because a
team of newly hired personnel will be involved in designing new tour packages. Due to this,
business needs to select cost-effective sources of human resources. For example, the internet is
referred for selecting suitable personnel. At the same time, referral group will be considered as a
key strategy to approach potential employees for better performance of business.
Performance measure and targets
The performance of new services and associated personnel will be measured on the basis
of SMART objectives. It reflects that increased customer base and a higher rate of return are
considered as the potential aspects. It focuses upon selecting appropriate strategies so as to
deliver good quality of services to a large number of visitors.
MARKETING
The marketing of new services that are related to the adventurous trip will be done by
using upgraded technologies. In this regard, internet and mobile applications are used so that
accordingly all customers can be targeted at a time. Apart from this, newly launched services are
promoted through effective advertisement so as to attract potential employees. Moreover, social
media marketing will also be done so that youngsters across the globe can be informed related to
the availability of good quality of services. Not only are this but services promoted with the help
of effective strategies like discounting.
RESEARCH AND DEVELOPMENT
The new adventurous trips are introduced in the marketplace after conducting different
kind of research and development activities. For this purpose, market research is conducted
under which potential buyers are approached from gathering primary data,. Furthermore,
secondary data are also collected by conducting PESTLE analysis. At the same time, competitor
analysis is done so that strategies adopted by them can be tracked in order take appropriate
action.
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PRODUCTION AND DELIVERY
The total packages of services include country club Tasmania, Tassie Bound adventure
tours and adventure island tours as well as Bonorong wild life Sanctuary will be included. These
attractive destinations are designed in a package and accordingly, visitors will be communicated
with the help of effective mode. In this regard, particular mobile application of adventurous trip
would be prepared and promotion of the same will be done on social media and other related. In
this regard, following mentioned sources are needed-
Project manager 1
Finance manager 2
Marketing manager 4
Human resource manager 1
Staff 5
Total 13
In order to deliver the adventurous trip, different other aspects are considered such as the
need of one computer system and quality control system. For this purpose, project management
techniques are applied in order to control the quality. At the same time, research and
development activities are carried out so as to accomplish task related to delivering good quality
of services. In addition to this, risk management is applied for assessing the issues which are
being faced while rendering good quality of services to end users.
SUPPLY CHAINS
Supply chain plays important role travel and tourism sector under which business focuses
on arranging a different kind of facilities. However, hotels and other related resources will be
availed with the help of long-term contract. Owing to this, travel agencies, restaurants, hotels and
tourist destinations are key suppliers who play a major role in delivering good quality of
services. Thus, key strategies will be establishing long-term contract with hotels and restaurants.
Moreover, new hotels and destinations are discovered so that accordingly visitors get good
quality of services.
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BUSINESS SYSTEMS AND PROCESSES
According to the analysis of internal and external environment, it can be said that
proposed business needs to focus on quality and risk management. It would be effective to
reduce potential risk related to issues which are being faced by customers. Apart from this,
financial management is also done by approaching cost effective sources. However, cost
effective sources are considered in all business activities whether that is production, HRM and
marketing or finance. This in turn management can reduce cost of production and increase
overall rate of return.
STAKEHOLDER RELATIONSHIPS AND ALLIANCES
The stakeholders included in current business will be shareholders, employees and
customers as well as suppliers and government as well. All these stakeholders are approached by
using effective mode of communication such as formal meeting and social media marketing as
well as other related aspects like E-mail. Apart from this, annual report of business will be
presented in publicly available parties so as to related stakeholders can be collected all record. It
would be effective for them assess the performance of business and new strategies. Moreover,
ideas and suggestions of stakeholders will also be taken so that business can bring improvement
accordingly.
ORGANIZATION AND MANAGEMENT
In terms of organisation and management, it can be stated that a team of personnel's will
be developed. In the modern era, organisation and effective management of business operations
are very essential for companies as it results in accomplishment of business objectives and aims
in the best possible manner. In order to sustain in the highly competitive marketplace, the
selected business enterprise will keep carrying out changes in its management practices at
regular intervals. It can also be stated that participative style of management will be used and the
services will be delivered with the help of a vertical organisational structure.
ENVIRONMENTAL AND SOCIAL IMPACTS
It can be stated that at the time of carrying out business practices, it will be required by
the proposed business to take care of different social and environmental factors. In the modern
era, the competition among businesses in the travel and tourism industry has become highly
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intense and therefore it is no longer easy for firms to attract new customers and retain the old
ones. Social impact on the operations of proposed business will be that the firm will need to
make modifications in the present services as per changing need and demand of people in the
market. This will support in developing sense of satisfaction among customers and will also
contribute to long-term development of the proposed business. On the other side of this, it can be
argued that while delivering travel and tourism related to services the proposed business will
need to ensure that no negative impact is created on the environment. To retain the workers, the
democratic style will be used, and decisions will be taken on the basis of views and opinions
provided by them. The rationale behind this is that it will support in getting the best possible and
reliable information as employees are the one who comes in direct contact with customers.
Therefore, the proposed business will be able to gain more accurate and reliable information.
RISK FACTORS AND REGULATORY COMPLIANCE
The main and most important risk associated with carrying out business operations is
related to changes in taste and preference of people in the market. The proposed business may
start facing issues and challenges in increasing sales in situations where the demands and needs
of people in the market tend to change drastically. Apart from this, changes in the economic
environment all across the global is another key risk associated with the proposed business. In
order to mitigate or deal with all the risk mentioned above, efficient risk management systems
can be developed by the selected business enterprise to offer different tour related services to
travellers in the country. A change in the norms and regulations that is developed by government
and tourism authority is another major risk which is associated with the introduction of new
services in the marketplace.
CORPORATE GOVERNANCE
It can also be expressed that at the time of carrying out its business operations, the
proposed business will be taking care of areas such as corporate governance. Here, the interests
of all the key stakeholders involved will be addressed in the best possible manner. For example,
customers will be provided with services according to their changing demand, employees' views
and opinions will be taken into consideration, etc. Other than this, the proposed business will
also make sure that the interest of stakeholders such as investors has been taken care of and
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satisfied in the best possible manner. It can be expressed that all these practices will contribute to
long-term growth and development of the proposed business.
FINANCIALS
Note: Financial statement is mentioned in appendix
Assumptions
 Revenue of business is expected to increase by 20%
 Marketing and promotional expenses is assumed to rise by 8%
 Expenses on development program is expected to increase by 12%
 Wages and salaries is predicted to rise by 12%
 Maintenance expenses is anticipated to increase by 1%
 Interest expenses is considered to be charged @ 15%
 Budget for retention of workforce is also arranged under which business will focus upon
increase their expertise and offering them reward as per their performance
APPLICATION OF INVESTMENT FUNDS
The sources of funds will be retained profit and a bank loan. It would be effective for
RACT destination to gather appropriate money for launching new services and hiring potential
candidate to deliver the same. These resources are selected because the time taken to acquire the
same is very less where management of business will not face any issue. Apart from this,
retained profit can be acquired in relatively less time span. In addition to this, the majority of a
fund will be used at the single time in order to design package and hiring employees. Apart from
this, strategies are applied for retaining existing staff for which monetary and non-momentary
reward will be used. This aids to retain personnel for longer time span and determine growth and
success of business. Therefore, selected sources of finance are most effective for implementing
the business idea.
STRATEGIC ACTION PLAN
The strategic action of the plan of current business will cover following activities
along with different schedules. It enables the business to cater the need of different
stakeholders and implement the business plan in the relatively short time span.
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Activities Duration
Setting objectives 2 weeks
Designing tour package 3 weeks
Attracting competent workforce 3 weeks
Retaining them 1 weeks
Communicating message with the major stakeholders 1 week
Implementation of plan 4 weeks
Taking reviews from customers 2 weeks
Execution 3 weeks
IMPROVEMENT
The current business plan will be done by taking into account objectives and aim.
However, any improvement will be made on the basis of results or information extracted from
consumers. This proves to be effective in accomplishing long as well as short-term objectives.
However, continuous monitoring will be ensured with the help of modifying current strategies in
the light on feedback and suggestions from related parties.
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REFERENCES
Journals and books
Alant, K. and Bruwer, J., 2010. Winery visitation sets: Intra-regional spatial movements of wine
tourists in branded regions. International Journal of Wine Business Research. 22(2).
pp.191-210.
Brinckmann, J. and Kim, S.M., 2015. Why we plan: the impact of nascent entrepreneurs'
cognitive characteristics and human capital on business planning. Strategic
Entrepreneurship Journal. 9(2). pp.153-166.
Drost, D. and Chaney, J., 2014. Core Course Outcomes Assessment and Program Continuous
Improvement Using an Integrative Business Plan–an Empirical
Evaluation. Developments in Business Simulation and Experiential Learning. 28.
Finch, B., 2013. How to write a business plan (Vol. 35). Kogan Page Publishers.
Hughes, M. and Carlsen, J., 2010. The business of cultural heritage tourism: Critical success
factors. Journal of Heritage Tourism. 5(1). pp.17-32.
Migliori, G.B. and et. al., 2014. The European Respiratory Society plans its future: the 2013–
2018 strategic plan.European Respiratory Journal. 43(4). pp.927-932.
Wallace, M. and Webber, L., 2010. The disaster recovery handbook: A step-by-step plan to
ensure business continuity and protect vital operations, facilities, and assets. AMACOM
Div American Mgmt Assn.
Zeppel, H., 2012. Climate change and tourism in the Great Barrier Reef Marine Park. Current
Issues in Tourism. 15(3). pp.287-292.
Online
RACT. 2016. [Online]. Available through: <http://www.ract.com.au/#>. [Accessed on 1st
December 2016].
Sector summary 2014. 2014. [Online]. Available through:
<http://www.stategrowth.tas.gov.au/__data/assets/pdf_file/0008/89585/Tourism.pdf>.
[Accessed on 1st December 2016].
The Royal Automobile Club of Tasmania Limited. 2015. [Online]. Available through:
<https://www.ract.com.au/SiteCollectionDocuments/RACTAnnualReport2015Final.pdf>
. [Accessed on 1st December 2016].
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APPENDIX:INCOME STATEMENT
Particulars Year 1 (￡) Year 2 (￡) Year 3 (￡)
Revenue 104400 125280 150336
Less: COGS (20%) 20880 25056 30067.2
Gross Profit 83520 100224 120268.8
Operating Expenses
0 0
Market Research 2700 0 0
Marketing and
promotional 5220 10022.4 12026.88
Development program 10440 11692.8 13095.936
Insurance 1500 1500 1500
Salary 15660 17226 18948.6
Miscellaneous
Expenses 2088 2505.6 3006.72
Maintenance 1044 1075.32 1107.5796
Total Operating
Expenses 38652 44022.12 49685.7156
Operating Profit 44868 56201.88 70583.0844
Less: Interest 900 600 300
PBT 43968 55601.88 70283.0844
Less: Tax (40%) 17587.2 22240.752 28113.23376
Net Profit 26380.8 33361.128 42169.85064
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