Strategic Management of Travel and Tourism Industry

The provided content comprises a diverse range of texts from various authors and publishers, primarily focused on management accounting, finance, and strategy. The texts cover topics such as innovative finance for public transport, financial analysis in the travel industry, pricing strategies, and the role of management accounting in decision-making. Additionally, some texts explore the applications of these concepts in industries like hospitality and tourism, highlighting trends, challenges, and success factors.

FINANCE AND FUNDING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.2................................................................................................................................................4
1.3................................................................................................................................................6
TASK 2 Covered in ppt...................................................................................................................7
2.1 In travel business managment accounting system is useful in decision making..................7
2.2................................................................................................................................................8
TASK 3 In travel business proper interpretation of financial statement is essential:......................8
3.1 Interpretation of two year balance sheet ..............................................................................8
TASK 4 Covered in poster.............................................................................................................11
4.1 Fund identify for business sector is useful in determing the source of finance..................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................13

INTRODUCTION
Hospitality industry is regarded as fastest and growing industry as its role has increases
with the increasing competition. This service industry has bifurcated into different segments
among which this travel and tourism is one of the integral part of this entity. Finance is that
medicine for an enterprise which will heal the wounds of an entity which due to the attacks of
competitors and external market changes. Merlin entertainment has been selected for this project
in order to define the roles and responsibilities of an entity to meet the financial requirements
imposed on a business. This project report is all about describing the various sources of finances
selected by an entity in order to expand their services to enter into new segment to lure wide
number of customers. It also defines various factors utilised by management and consideration of
several elements in determination of the price by choosing cost beneficial pricing methods.
TASK 1
1.1 significance of cvp in decision making decision
The travel and tourism industry is the fast growing industry in the business world. Every
business of any sector have a common objective that is profit maximization, So every business
needs to control their expenses or reduce their expenses with the view to increase the sales and
revenue (Law, 2015). In the business there are different expenses such as operating expenses,
accounting expenses, rent and wages fixed cost which have no impact on profit,they remain fixed
irrespective of number of output to be produce.
The variable costs such as raw material, energy usage, labour, distribution costs etc. is
useful in determining the cost of products. The variable cost changes with reference to number
of output to be produce. In the Merlin Entertainment if the prices will continuously increase
than the customers will not more attract on that organization. The costs should be varies and
changed periodically to attract more numbers of customers, in opposite of this if prices increase
than the customers will demotivate and then the sales and revenue will decrease which is
unfavourable for the Merlin firm.
To reduce the cost and increase the profit is some technique of CVP analysis. Here the
Merlin Entertainment firm using the Cost Profit Volume (CVP) technique to reduce cost and
increase profit. The CVP analysis is a planning process that management uses to predict the
future volume of activity, costs incurred, sale made, and profits received. CVP analysis is used to

determine how changes in costs and volume affect a company's operating income and net income
(Robbert and Roth, 2014). Total fixed cost, total variable cost are some proposition of break even
analysis.
Importance of CVP technique in fast growing industry travel and tourism sector's entity
Merlin Entertainment :
Sales revenue less variable cost will reveal contribution help in determining the CVP
analysis. Balance amount is deducted from fixed cost that will gives the profit.1
The total cost, revenue, variable cost are closely interrelated which have strong influence on
CVP analysis. The CVP relationship becomes important for budgeting and profit planning
because it has a cause and effect relationship.
To maximize the profit is one of the sole criteria of every business. In profit planning the
CVP analysis helps to determine the maximum sales volume which is essential to avoid losses,
and the sale volume at which the profit goal of the Merlin will be maximise. (Olbrich and Jansen,
2014). As an ultimate objective it helps management to find the most profitable combination of
costs and volume. It helps to provide various sales mix which facilitates variety of customers to
use wide variety of products or services to achieve maximum profit.
The analysis helps the management in the decision making process to increase
profitability, helps in price determination of the products and services also as well as it helps to
control the cost. With help of this analysis the management can evaluate the effect of cost
volume profit changes, in order to achieve expected profit.
· It helps in determine the levels of sales to be achieved to meet their targeted profit. The
managers will prepare the budgets consists of the costs and the expected revenues at any level of
production with help of the analysis. So, it helps in preparation of budgets.
1.2
Pricing methods used in the travel and tourism sector :
Every enterprise should decide the price which is quite useful for carrying out the
business activity. Sole consideration is made not on deciding the price of product but also on
Research and development and risk taking ability are some factors taken for deciding the price.
1
?

Ability to pay, market conditions, competitor actions, trade margins and input costs are some
elements of pricing strategy. Pricing is the process through which business sets the price through
which it will sell its products and services, and may be part of the Merlin's marketing plan. The
manufacturing cost, the market place, competition, market condition, brand and quality of
product are some of factor for deciding the price of product.
There are various methods or strategies adopted by the organization will help in order to
gain competitive advantage over its rivals which creates several threats and tough business
situation in order to maintain the existence of the organization (Sheresheva and Kopiski, 2016).
Some important pricing methods adopted by Merlin Entertainment plc are following below :
1. Discounted Pricing Method : The cost of the product is low which helps in
generating sales and some items for sales is being properly marked for identification purpose.
This method is utilized by Merlin plc during the off season, where consumers are less. This
approach is very helpful for organization in order to acquire quick response in sales and revenue.
In the discount offers the prices of products and services will decrease so consumers' attraction is
increases towards them. This method is useful because discount offers inspire the consumers to
buy wide range of services from the business entity.
2. Value Added Pricing Method :Rather than reducing the cost of product the emphasis
should be made on value addition process which is helpful in evaluating the best value added
process for deciding the cost of projects. Quality product should be consider rather than low
quality product. Tourists attract towards the most famous destinations like CHESSINGTON
world of adventure, Thorpe Park and other famous theme parks based on the resort and parks
which provides refreshment and releasable services and environment to all the tourists in an
attractive feature that can be adopted by this firm to attract the wide number of consumers and
tourists.
3. Cost Plus Pricing Method : For setting the prices of goods and services cost plus
pricing method have been used. Under this method management add all the cost plus some
percentage of profit are added to determine the price of such product. This technique of pricing is
broadly adopted by the organization to achieve short term and long term goals. In these regards,
the managers of entity can consider complete position of fixed cost along with variable cost

occurred in rendering of different kinds of services. The management entity adds some
percentage profit after determining fixed and variable cost.
4. Market-led Pricing Method : In the market price of similar product is evaluated from
the company point of view .Similar product are to be considered from company point of view.
Travel and tourism industry adopt such methods in which prices of the product are easily
compare. Travel and tourism leisure, accommodation packages, prices of honeymoon packages
etc. are some of similar line of business where such method is used. Seasonal and unseasonal
demand is to club together for determining the revenue of company.
1.3
Travel and tourism business effect the profitability of company using Merlin Entertainment PLC
are given below:
In every sector profit is the main part of any business. Increase in owner's equity increase
in assets, reduction in liability have huge impact on profitability of company(Gomezelj, 2016).
Profit margin can be termed as income of company which is greatly influenced by total sales and
cost of firm. It is those things which every business will make efforts in order to earn this much
of amount as their main aim is to earn higher profit by boosting their level of sales and revenue.
There are various factors which entity must used in order to earn profit of goods and
services. Some most important factors are disclosed below :
· Costs : company which render service such as hotel, transportation etc. are effected by
the pricing and costing methods. The price of holiday packages is increased and increase in hotel
services will lead to increase in fuel cost. All these factor have adverse impact on profitability of
firm.
· Market Demand and Industry Standards : Alteration in service quality as well as
profitability is of great important from company point of view.
· Political Environment : It creates huge impact on pricing methods and profitability of
the organization (Inderst, 2013). In these regards, taxation and other policy of authorities and
trading rules with other nations are creating huge impact on costing of services. So, change in tax
rates and other government charges influence profit of the organization.
· Economic Environment : During the global recession, people makes efforts to reduce
unwanted spending like travelling etc. This thing creates great impact on market demand in

tourism and travel sector. In this situation, the business entity tries to encourage demand by
providing the discount offers and managing low profit margin in order to attract consumers.
TASK 2 Covered in ppt
2.1 In travel business management accounting system is useful in decision making
Travel management information tool
It is essential tool to be used by an entity in order to automate their travel related services with
the help of using electronic medium as important tool. The division of several departments by
assigning tasks and defining roles and responsibilities (Abbasi, 2014). There are various services
provided by Merlin entertainments by inter linking their services in electronic systems which are
given as below:· Logging into GSA travel by using management information reports are supplied to the
travel supervisors· Scheduling of each and every tasks which can be completed within prescribed time
periods· Preparation of GHG reporting spreadsheets which includes all kind of reporting
framework while working in this entity.
The data obtained by applying various techniques as it is critical for managing different travel
related services for travel spend, optimizing travel programs that is the offering of various
packages to all the customers (Dollery, Kortt and Grant, 2013). It helps an entity in order to
ensure that all travel policy will be complied by an entity.
This travel related services provided by Merlin entertainments will provide various kinds of
services which will cover under the same category which are given as below:· Travel management· Policy and procedures· Conference planning· Strategic sourcing
Budgeting is also prepared by an enterprise in order to predict the sales and incomes generated
an entity in near future by minimising their all kinds of expenses which can be incurred in an
entity (Mulley and Walters, 2014). It is prepared by an entity as it is regarded as most important
tool which is used as essential element of decision making (Ismail and King, 2014). It is prepared

an enterprise owner in order to determine the future cash flows and reducing all kinds cash
outflow which will decreasing the business efficiency in return.
2.2
Major concern of management is to reduce all kinds of costs with a clear motive to
minimise them without increasing burden on an enterprise (Galliers and Leidner, 2014).
Management information systems will be helpful for merlin entertainments in determining their
costs and other element which induces the amount of profit. The collection of all kinds of
information which reflects the internal business efficiency will form as one of the advantage for
an entity in order to make quick and spontaneous business decisions (Kroenke and Boyle, 2015).
The decisions of an entity will depict its efficiency in aligning their team goals in a closely
connected chain which joints all the components that is all the expenses and incomes in a long
chain without breaking all the chain in mid of the year (Ward and Peppard, 2016). All the
business decision will be helpful for an entity in order to gain competitive advantage as their
main motive is to beat all kinds of rivals who exist in the same streams that is Thomas Cook is
the biggest and global competitor of these organisations (Stewart, 2014). There are several tolls
and techniques which will assist an entity in forming correct and good decisions which are given
as below:
Trends and patterns- It is helpful for an entity in order make decisions regarding the external
market by doing market survey as this survey will define various trends and patterns of the
hospitality industry to transform their products and services according to the external changes to
attract wide number of customers.
Prediction- The buying pattens of the customers can be predicted by an entity on the basis of
current and pasts patterns in order to design all the future targets which will be benefited for an
enterprise.
TASK 3 In travel business proper interpretation of financial statement is essential:
3.1 Interpretation of two year balance sheet
Ratio analysis is integral part of an enterprise as it is also regarded as comparative
analysis in which entity will be able to compare their current business performance with previous
year in order to determine its business efficiency (Stewart, 2014).For quick business decision
ratio analysis is quite helpful in evaluating financial position of company. For depicting the true
financial position some ratios which involves short term solvency ratios, debt management

ratios, asset management ratios, profitability ratios, efficiency ratios and market value ratios are
to be analysis. These ratios are commonly used in an entity in order to analyse the true business
performance by observing their current financial status as it is essential tool to be used in an
enterprise which will provide recommendations and suggestions to an entity in order to improve
their skills and capabilities (Markgraf, 2016). It is that tool which possess different features
necessary to facilitate an organisations in assessing their financial skills and capabilities.
The data obtained from these tools is helpful for an entity in order to obtain reliable and
accurate financial statements (Ismail and King, 2014). The computation of various forms of
ratios in various major categories facilitates an entity in order to make comparison of their
internal business entity from other external market forces such as overall industry win which
they are operating or the competitors (Inderst, 2013). Forming comparison with the competitors
in terms of internal business entity with another entity.
Table : Calculation of ratios
Financial Ratios Formulas 2015 2014
Liquidity Ratios
Current Ratio Current Asset / Current Liabilities 0.28 0.24
Quick Ratio (Current asset – closing
inventory)/Current Liabilities
0.12 0.08
Profitability Ratios
Gross Profit Ratio (Gross Profit/ Net Sales)*100 18.51 17.93
Net Profit Ratio (Net Profit/ Net sales)*100 10.05 10.55
Operating Profit Ratio (Operating profit/ Net sales)*100 12.97 13.75
Gearing Ratios
Debt Equity Ratios Debt/ Equity 0.12 0.17
Total asset Turnover ratio Net sales/ total assets 1.54 1.54
Inventory turnover ratio COGS/ inventory 93.71 98.22
Interpretations

Liquidity ratios- One of the essential category of ratio analysis as ensuring liquidity of an
organisation will help an entity in return in order ensure its overall financial health (Kroenke and
Boyle, 2015). Liquidity of an entity reflects that the business have enough cash balance in order
to pay off all their short term obligations which was imposed on the business which needs to be
reduced by improving the status of an organisation (Hanna, 2014). It can be said that “ Higher
the liquidity higher will be the strength of an enterprise” this phrase states that an entity will beat
all the existing competition imposed by external market changes in terms of market financial is
that places heavy burden on the performance of an entity.
Current ratio- This ratio will able to find out the perfect balance among most important entity
which should be in correct alignment that current assets and current liabilities are equal position
to meet all kinds of business obligation (DRURY, 2013). The current ratios have increases from
the previous which is clear sign of increasing current assets to meet out all its current liabilities
as the main aim of an entity is to meet all kinds of short term obligations that is trade creditors
are paid off from the available cash held with an entity.
Quick ratio- It is that ratios which slightly different from current ratio as it shows the proportion
among the quick assets which is current assets less the amount of inventory in comparison with
the current liabilities imposed on the business of Restaurant PLC (Brigham and Ehrhardt, 2013).
The ratio has increases from the previous year but its is not according to the ideal ratio which is
determined as per the standard guidelines of the overall industry (Figge and Hahn, 2013). This
increment should be maintained as reaching the standard ratios is long journeyed which will be
completed in short span of time before the external attack of financial crisis with a strong
weapon of recession.
Profitability ratios- The major objective of every organisation is to earn profit as their existence
is possible to meet all kinds of objectives which are major attached with the profit amount
(Dollery, Kortt and Grant, 2013). The motive of business practices and operations to earn profit
which reflects the efforts made by an entity in order to generate high amount of the sales and the
revenue and contributing their highest efforts in maintaining the growth of a profit.
Gross profit ratio- It is one of the major category of the profitability ratios which help to
ascertain the amount of profit generated by excluding the figure of cost of sales from the raw
sales figure (Ahrendsen and Katchova, 2012). The determination of gross profit is considered as

incomplete as its don't regarded as true profit. It will not consider the amount of taxation in the
profit figure but forms one of the basis for determining the net profit which should be keep at
higher level in order to generate high level of profit (Abbasi, 2014). It has increases from 2014 to
2015 due to the lower amount of cost of sales and the high generation of the sales and the
revenue.
Net profit- The main pillar of the business as it will reflect the true figures of the business by
revealing the true picture about the profitability of an enterprise (Galliers and Leiden, 2014). The
decreasing net profit ratio from previous years is due to the heavy burden of taxation on an
entity.
Operating profit- It is also one of the forms of profitability which reflects that form of profit
which is generated from business operations as it is specific form of profit (DRURY, 2013). It is
declining from the previous figures due to the increasing effect of all the operating expenses.
Gearing ratios- the another name of these gearing ratios is financial ratios as it ascertain the
efficiency of the financial ratios which helps an entity in order to earn heavy amount of business
net worth.
Debt equity- The proportion of debt and equity are determined in which higher ratio of equity
will determine the business efficiency and higher proportion of debt will reflect the bankruptcy
situation of a business by revealing their burden of debt (Kaplan and Atkinson, 2015). In the
above table the ratio has decreases which needs to be controlled by eliminating all kinds of debt
components.
Total asset turnover- The stability of ratios shows no efforts applied by the entity in
contributing their assets in boosting the sales level.
Inventory turnover- Decreasing ratios will denote that the cost of sales are higher in proportion
to the inventory available with the business to meet the obligations on an enterprise.
TASK 4 Covered in poster
4.1 Fund identify for business sector is useful in determing the source of finance.
Finance is the lifeblood for an enterprise as arranging finance will require patience and
intelligent skills to gather financial resources from external parties (Inderst, 2013). Funding is
regarded as essential part of an enterprise which needs to be selected from best appropriate

sources which help Merlin entertainment to get cost efficient techniques which will not arise any
kind of burden on an enterprise which will increases the liability of an organisation in return. The
main motive of an enterprise is to use different sources of finance to support their existing
conditions as it is widely used by an entity in order to expand their business entity (Stewart,
2014).
Cross railway projects is the one of business expansion projects in which, merlin
entertainments entered into with the help of external entities by taking their help ion form of
arranging financial resources.
Funding can be done from different sources such as grant from tourism department, business
angels and equity.
Equity shares· It is considered as best suitable form of financing in which equity shareholders invited
will get ownership in return.· The cost of issuing shares is not enough as it depends on the size of entity· It is less risk to use this source· No repayment of capital only in the case of wounding up of the business· Dividends to shareholders and participating in the profit.
Government grant· No need to repay the amount borrowed· Additional support from tourism department· Relief from taxation and all other legal matters.
Business angels· Support from existing industry experts coupled with the financial support from investors· Interest in form of business returns to be paid· Any amount can be taken from the investors
The Best suitable source of finance that can be arrange by Merlin entertainments is government
grant as it is suitable for the business enterprise to choose this form of financing.

CONCLUSION
It can be summarised from the above project report that the role of travel and tourism
industry has expanded due to the globalisation process. The globalisation enhances the existing
capabilities of an entity in order think bigger to achieve all the goals and objectives of an entity
which in turn increases the capabilities of an individual. Ratio analysis techniques are also used
in the business enterprise to compare their internal business performance bay comparing it with
another businesses. It brings lots of opportunities in terms of business expansion by inviting
various external agencies to support the establishment in building strong fundamentals in the
business. The existing partners of the merlin entertainments will also support an entity in return
in increasing' the scope their current services as thy have collaboration with different themes
parks such as LEGOLAND, which provides various entertainment and fun related services
which target kids to attract their overall families.

REFERENCES
Books and journals
Abbasi, H., 2014. Role of Management Accounting Information System in Organizations.
Journal of Business and Innovation. 2(1). pp.96-102.
Ahrendsen, B. L. and Katchova, A. L., 2012. Financial ratio analysis using ARMS data.
Agricultural Finance Review. 72(2). pp.262-272.
Bhowmik, S. K. and Saha, D., 2013. Sources of Finance. In Financial Inclusion of the
Marginalised (pp. 61-71). Springer India.
Brigham, E. F. and Ehrhardt, M. C., 2013. Financial management: Theory & practice. Cengage
Learning.
Dollery, B. E., Kortt, M. A. and Grant, B. J., 2013. Funding the Future: Financial sustainability
and infrastructure finance in Australian Local Government.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Figge, F. and Hahn, T., 2013. Value drivers of corporate eco-efficiency: Management accounting
information for the efficient use of environmental resources. Management Accounting
Research. 24(4). pp.387-400.
Galliers, R. D. and Leidner, D. E., 2014. Strategic information management: challenges and
strategies in managing information systems. Routledge.
Hanna, R. W., 2014. The adoption of performance funding in higher education: A combination
of public policy, finance and politics.
Inderst, G., 2013. Private infrastructure finance and investment in Europe.
Ismail, N. A. and King, M., 2014. Factors influencing the alignment of accounting information
systems in small and medium sized Malaysian manufacturing firms. Journal of
Information Systems and Small Business. 1(1-2). pp.1-20.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Kroenke, D. M. and Boyle, R. J., 2015. Using Mis. Prentice Hall Press.
Mulley, C. and Walters, J., 2014. Workshop 7 Report: Innovative finance for innovative public
transport. Research in Transportation Economics. 48. pp.389-392.
Norris, P. and van Es, A. A., 2016. The Lessons for Political Finance Reform. Chequebook
Elections?: Political Finance in Comparative Perspective. pp.257.
Stewart, B., 2014. Sport funding and finance. Routledge.
Ward, J. and Peppard, J., 2016. The Strategic Management of Information Systems: Building a
Digital Strategy. John Wiley & Sons.
WisCombe, C. and et.al., 2016. Finance and funding in the travel sector. Operations
Management in the Travel Industry. pp.154.

Needles BE., Powers M. and Crosson SV., 2013. Financial and Managerial Accounting. 10th Ed.
Cengage Learning.
Vogel H., 2016. Travel Industry Economics: A Guide for Financial Analysis. 3rd Ed. Springer.
Jensen M., 2013. Setting Profitable Prices: A Step-by-Step Guide to Pricing Strategy—Without
Hiring a Consultant. John Wiley & Sons.
Mowen M., Hansen D. and Heitger D., 2013. Cornerstones of Managerial Accounting. 5th Ed.
Cengage Learning.
Olbrich R. and Jansen H. 2014. Price-quality relationship in pricing strategies for private labels.
Journal of Product & Brand Management. 23(6). pp.429-438.
Robbert T. and Roth S., 2014. The flip side of drip pricing. Journal of Product & Brand
Management. 23(6). pp.413-419.
Nimtrakoon S. and Tayles M., 2015. Explaining management accounting practices and strategy
in Thailand: A selection approach using cluster analysis. Journal of Accounting in
Emerging Economies. 5(3). pp.269-298.
Sheresheva M. and Kopiski J., 2016. The main trends, challenges and success factors in the
Russian hospitality and tourism market. Worldwide Hospitality and Tourism Themes. 8(3).
pp.260-272.
Law R. and et.al., 2015. Distribution channel in hospitality and tourism: Revisiting
disintermediation from the perspectives of hotels and travel agencies. International Journal
of Contemporary Hospitality Management. 27(3). pp.431-452.
Gomezelj D., 2016. A systematic review of research on innovation in hospitality and tourism.
International Journal of Contemporary Hospitality Management. 28(3). pp.516-558.
Zdenka Z. and Valentina S., 2014. Systematic thinking for socially responsible innovations in
social tourism for people with disabilities. Kybernetes. 43(3/4). pp.652-666.
Online
Freedman, J., 2016. Why Management Accounting Is Important in Decision-Making. [Online].
Available through: <http://smallbusiness.chron.com/decision-making-53947.html>.
[Accessed on 5 November 2016].