Revenue Management and Tourism Industry Analysis

This assignment provides an in-depth analysis of revenue management principles and their application in the tourism industry. It includes a case study on British Airways, examining the importance of revenue management in connecting destinations worldwide. The report concludes that effective revenue management is crucial for organizations like British Airways to maximize profits and stay competitive. It also highlights the need for businesses to adapt to changing legislations and customer demands.

The Travel and Tourism Business
Toolkit

TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
P1 The rational and principles of revenue management for the travel and tourism industry..........3
PART 2.................................................................................................................................................6
Covered in PPT................................................................................................................................6
TASK 3.................................................................................................................................................6
P3Explore specific legislation that organisations in the travel and tourism industry have to adhere
to......................................................................................................................................................7
P6 Using specific examples, illustrate how company, employment and contract law has a
potential impact on business decision making in the travel and tourism industry...........................7
TASK 4.................................................................................................................................................8
P7 The different types of financial statements and reporting mechanisms for organisations within
the travel and tourism industry........................................................................................................8
P8 The importance and value of budgets for controlling business performance and identifying
variances..........................................................................................................................................8
CONCLUSION....................................................................................................................................9
REFERENCES...................................................................................................................................10

INTRODUCTION
Travel and tourism industry are very wide in nature and work to connect the world at
specific cost of money. The chosen firm for this report is British Airways, which is one the biggest
airways organisation of UK and also one of the leading airways of world's premium airlines. The
headquarter of organisation is at Heathrow, Gatwick, London airport. It is one of the most extensive
scheduled airlines network of the world, which connect about 1000 destinations of over 150
countries (Bayliss, and et. al, 2014). This report will explain the importance and principles of
revenue management, and application of its tool for British Airways. Along with this, a discussion
will take place on legislation of travel and tourism sector, along with their impact on decision
making of them. And in the last, a study will explain the importance of budget for them along with,
different types of financial statements and reporting mechanisms.
TASK 1
P1 The rational and principles of revenue management for the travel and tourism industry.
The rationale or purpose of revenue management is the application of trained analytics that
predict consumer behaviour at the micro-market levels and optimize product availability and price
to maximize gross and revenue growth of the organisation ( Budeanu, A. and et. al., 2016). In order
to measure the revenue, Yield management is a variable pricing strategy, based on anticipating,
understanding, and influencing consumer behaviour in order to increase profits or revenue from a
fixed time-limited resource, Like airline seats or hotel room reservations or advertising inventory.
There are some principles of Revenue management, which are as follows :

1. Market Segmentation – One of the principle needed to apply revenue management in
hotels is market segmentation. It allows British airways to target a variety of customer
groups with different behaviour with an offer that matches their needs and budget level
( Chang, F. Backman and Chih Huang, 2014). The market segmentation of organisation will
help to identify the purpose of the business trip. The price does not determine the market
segmentation, clear distinction must also be achieved between individual and group
business.
2. Historical Demand and Booking patterns (demand calendar) - This is the principle
before budget and forecasting, and it will also help you make informed pricing decisions
based on data and statistics. It is a yearly roadmap to build revenue management strategy. It
demonstrates historical demand patterns matching them with future events. In this
organisation need to identify all events that impact their demand, either it is positive or
negative, demand generators must be recognized. This should be updated every time when
organisation identify an event impacting their demand. This is beneficial for organisation to
evaluate that how much revenue each event can generate. Along with this considering the
demand exceptions is also necessary.
3. Demand Forecast and Displacement Analysis – Demand forecasting in the tour industry is
initialized with making an budget. The budget should be the first forecast of the
organisation. To make an accurate forecast, British airways will discuss the following
elements - unconstrained demand, stay patterns, booking pace. The Budget of organisation
must be realistic but it is also the time to set new targets ( Cohen, S., 2017). The budget
should be developed daily to answer such questions, like- What if organisation invest in
sales resources, what if firm invest in online marketing, what if company increase their
online visibility?, etc.
4. Pricing and Inventory management - Price management refers to that the organization,

which provide different price to various section according to the change of demand
systematically. Taking airline as an example, if the airline has down the data about the
customer type and their different demand, it can set up different price level and price
structure ( DeLacy and et. al, 2014). For example, the airline can provide a discount price to
those customers who book early. In fact, both the discount price in low season and the high
price in high season of many tourist organization belong to price management.
5. Overbooking Information System - Most products and services of many tourist
organization can be booked and when customers book, the company can negotiate
effectively. When there is a opportunity then the company can negotiate with the customer,
it should try to sell the most expensive product and realize the greatest value of the products.
To summarize, yield management is a knowledge base method to make the organisation
recognize best revenue, whose centre is price control, booking sales and capacity
management.
P2 How a specific sector of the travel and tourism industry applies revenue management tools to
generate and maximise profit.
Revenue management is very important for organisations of hospitality and tourism industry.
As it help in maximising the profit and also help in attracting ample number of customers towards
their products and services. There are several toots and techniques which British Airways can use
for increasing their profitability. As it is one of the biggest organisations of airline sector in the
world. It is very much needed to use these tools in effective manner so that they can gain some
competitive advantages. Some tools which they can use are as follow: -
1. Capacity utilisation (yield per available seat) - Capacity utilisation is an crucial concept for
applying revenue management. This is a measure of the extent to which the productive
capacity of a business is being used. This can be defined as, the percentage of total capacity
that is actually being achieved in a given period. It is often used as a measure of productive
efficiency ( Höpken, W. and et. al, 2015). Average production costs tend to fall as output
rises – so higher utilisation can reduce unit costs, making a business more competitive. So
firms usually aim to produce as close to full capacity (100% utilisation) as possible.

2. Discount allocation – Discount allocation refers to reducing the cost of services and
products provided by organisation. This is generally done only when, the product do not get
sold or when organisation have product or service on huge amount and they want to clear
their stock. British Airways have to reduce the cost of their seats if the time of flight is near
and they have too much vacant seats in it. This will help their flight to some revenue which
is good then nothing.
3. Duration control – This is a method used by organisation like hotel mostly. According to
this, manager of organisation have to check that on which date they have most of the
booking for their products and service. For example, if hotel have 100 rooms and for 10th
March they have booking for 90 rooms, but on 8th and 9th of March they have booking for
only 50 rooms and similarly condition is on 11th and 12th march ( Hunt And et. al, 2015).
Then manager have to cancel their booking on 10th and have to allot only to them who want
service for 8th to 12th March. This will help them in increasing their revenue.
PART 2
Covered in PPT
TASK 3

P3Explore specific legislation that organisations in the travel and tourism industry have to adhere
to.
It is very important for an organisation of travel and tourism sector to follow some legislations, so
that they do not face any problem in future. British airways has to follow different legislation
which are as follow :- Trade description act, 1968 : This act is for customers of organisation, according to this
act, organisation have to take care that they do not mislead their customers by providing
wrong information for the products and service to their customers ( Legislation of UK,
2018). Here British Airways have to take care that the information provided by them to
their customers must be authentic, so that their customers do not get mislead.
 Consumer protection act, 1987 : In this, organisation has to follow some set of rules for
pricing strategies. According to this, if organisation mislead their customers by providing
wrong information related to pricing of products, then it can cause them huge amount. In
this, British Airways have to make same pricing strategies for different customers of
different sector, according to their demands. This will help them in keep themselves safe
from legal problems related to pricing of products and strategies.
P6 Using specific examples, illustrate how company, employment and contract law has a potential
impact on business decision making in the travel and tourism industry.
There are several rules and regulations which are required to be followed by organisations, so that
they do not face any legal problem. For doing so, it is very important for organisation like British
Airways to make changes in their decisions according to the needs. Some of these regulation which
affect the decision making of manager are as follow :-
1. Minimum wages act, 1998 : This act says that organisation who have hired some
employees have to pay at least the selected amount, and if any organisation do not does so,
then it is possible that organisation can get fixed in some legal problems. If British Airways
use to pay wages which are lesser then decided, then for keeping themselves safe it is
important for organisation to make changes in their strategies related to wages of
employees.
2. Contract act, 1990 : This is the act related to contract between different business entities.
According to this, companies have to follow the rules and steps which are designed by all
the partners in contract deed. If British Airways do not follow any of the rules or step then
it can create a huge problem for organisation and it is very much possible that they can face

problem related to legal issues. Along with this, it can affect their goodwill and financial
condition.
TASK 4
P7 The different types of financial statements and reporting mechanisms for organisations within
the travel and tourism industry
Financial statements are the reports, which are required by an organisation to make a clear
vision for the revenue, profits and loss which are generated in specific time period in the favour of
that company. British Airways is huge organisation, which need to maintain their financial
statements on regular time period, so that they come to get knowledge about their profits and loss.
Following are the different mechanisms that British Airways can use for maintaining their financial
statements: -
1. Cash flow statement : Cash flow is first because without cash, nothing is possible in an
organisation ( Lamsfus and et. al, 2015). British Airways is huge organisation, therefore it is
very important for them to manage their cash flow so that they can get knowledge about
current position of cash with organisation. This help them in making their strategies for
investment, so that they do not face any problem related to cash during making investment.
2. Income statement : This statement help an organisation to get knowledge about the income
of them, so they can manage their future strategies. This statement will British Airways to
get knowledge about the rate of investment, which details about the percentage of income
over the investment made by them. It consist of P&L account, which shows the profit and
loss of organisation. This also help organisation to get detail about revenue generated by
their functioning.
3. Balance sheet : Balance sheet generally get designed on a special time period, it can be
quarterly, half yearly, or can be yearly. This shows the complete assets and liabilities
companies have ( Mowforth and Munt, 2015). This will help British Airways to get
knowledge about the assets where they have investments along with this, this help them in
balancing the financial performance of their organisation.
P8 The importance and value of budgets for controlling business performance and identifying
variances.
Budget is a financial plan which make a clear vision for organisation that what they have to

achieve in specific time period and how much fund will they require for achieving this. British
Airways is huge organisation and also make investment in their resources at huge amount, it is very
important for them to make a proper budget plan so that they do not face any issue in future. Budget
will help them in setting the funds which they have to spend on resources and which they have to
invest (Oppewal, Huybers and Crouch, 2015). For example, the study the tourist conditions of UK
within 1 year, which result that they increase in number of tourist in UK will be by 20 percent. Then
they have to make a plan which will help them increasing their resources, and also have to assign
some funds and budget for it, which can avail them some profits. For this they also have to make
coordination with their business partners, like housekeeping, to increase their resources over a
specific amount that was decided in budget. For this, with the increase in 20 percent increment in
number of customers, it is estimated that company have to spend about $1000 billion on their
resources like, air crafts, boarding services, security, housekeeping, reservation mediums.
CONCLUSION
From the above report, it has been concluded that travel and tourism sector play an
important role in connecting the world. British Airways is one of the leading organisations of the
world, and work to connect 1000 destination of 150 countries. It is very important for them to make
revenue management in their organisation, so that they get knowledge about the funds and assets of
organisation. Along with this, they can follow different principles of revenue management, along
with some tools which can improve their working. There are several legislations which they have to
follow, and these legislations can have power to change the decisions earlier taken by them. Along
with this, they can make different financial statements, which can explain them their financial
conditions, and also can have to make budgets for their future planning.

REFERENCES
Books and Journals
Bayliss, J. and et. al., 2014. The current and future value of nature-based tourism in the Eastern Arc
Mountains of Tanzania. Ecosystem Services. 8. pp.75-83.
Budeanu, A. and et. al., 2016. Sustainable tourism, progress, challenges and opportunities: an
introduction.
Chang, L. L., F. Backman, K. and Chih Huang, Y., 2014. Creative tourism: a preliminary
examination of creative tourists’ motivation, experience, perceived value and revisit
intention. International Journal of Culture, Tourism and Hospitality Research. 8(4). pp.401-
419.
Cohen, S., 2017. Decline, renewal and the city in popular music culture: Beyond the Beatles.
Routledge.
DeLacy, T. and et. al., 2014. Green growth and travelism: Concept, policy and practice for
sustainable tourism. Routledge.
Höpken, W. and et. al., 2015. Business intelligence for cross-process knowledge extraction at
tourism destinations. Information Technology & Tourism. 15(2). pp.101-130.
Hunt, C. A. And et. al., 2015. Can ecotourism deliver real economic, social, and environmental
benefits? A study of the Osa Peninsula, Costa Rica. Journal of Sustainable Tourism. 23(3).
pp.339-357.
Lamsfus, C. and et. al., 2015. Going mobile: Defining context for on-the-go travelers. Journal of
Travel Research. 54(6). pp.691-701.
Mowforth, M. and Munt, I., 2015. Tourism and sustainability: Development, globalisation and new
tourism in the third world. Routledge.
Oppewal, H., Huybers, T. and Crouch, G. I., 2015. Tourist destination and experience choice: A
choice experimental analysis of decision sequence effects. Tourism Management. 48.
pp.467-476.
Online
Legislation of UK. 2018. [Online]. Available through : <http://veerpalkaur.blogspot.com/>./