Principles of Revenue Management in Travel and Tourism Industry

This document provides an overview of the principles of revenue management in the travel and tourism industry. It explains the importance of pricing, elasticity of demand, demand forecasting, and availability in generating revenue. The document also discusses the stages of HR life cycle and its significance in talent retention and development. Furthermore, it explores the legislation followed by the industry and its impact on business decision making. Lastly, it covers the different types of financial statements and the importance of budgeting in the industry.

The Travel and Tourism
Business Toolkit

Table of Contents
Introduction.................................................................................................................................................2
LO1.............................................................................................................................................................3
P1 Rational And Principles Of Revenue Management Of Travel And Tourism Industry........................3
P2 Application Of Revenue Management Tools To Generate And Maximize The Profits......................3
LO2.............................................................................................................................................................4
P3 Stages Of HR Life Cycle And Importance In Retaining And Developing Talent..............................4
P4. Development Of Performance Management Plan, Techniques To Resolve Negative Behavior And
Retention Issues.......................................................................................................................................5
LO3.............................................................................................................................................................6
P5. Explore The Legislation Follows By Travel And Tourism Industry..................................................6
P6. Impact Of Company, Employment And Contract Law On Business Decision Making.....................6
LO4.............................................................................................................................................................7
P7. Different Types Of Financial Statements And Reporting Mechanism..............................................7
P8. Importance Of Budget And Identification Of Variance.....................................................................9
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

Introduction
Travel is the activity in which movement of people is happening between two different
geographical locations in order to get entertainment or exposure or attain meetings etc. Travel
can be done through vehicles such as car, bus, train, boat, airplane, ship or by foot too. Travel
can be done without luggage or with luggage. Tourism refers to the activity in which people do
travel for the various purposes. It can be national or international. Travel and tourism is an
industry in which various travel agencies are working and operating its business successfully. It
comes under the head of service sector. It helps country to earn foreign currency and develop its
economic conditions. Topdeck is tour operator which was established in year 1973. Currently
Topdeck is operating in 65 countries (Boniface, Cooper and Cooper, 2016). Report will highlight
the principles of revenue management and use of tools in order to generate revenue. The report
will review the HR life cycle stages and its importance. The report will also explain about the
legislation that applies to travel and tourism industry and its impact on the business decision
making. Report will also explore the financial reporting and mechanism of the particular industry
and also explain the importance of budgets in business.
LO1
P1 Rational And Principles Of Revenue Management Of Travel And Tourism Industry
Revenue management is the application of analytics which help industry to predict about
the customer behavior, optimize the availability of services and price to maximize the revenue
growth. There are various principles of revenue management which can drive and generate
revenue in a particular situation in the industry (Board and Skrzypacz, 2016). These principles
are as follows –
PRICING – It refers to the process of determining the price of services provided by industry to
its customers in order to gain and generate revenues. The price determination is done on the basis
of various pricing strategies adopted by industry. Generic pricing strategies are most popular
strategies used in the industry.
ELASTICITY OF DEMAND – Revenue is directly linked to the demand of customers for the
services provided by travel and tourism services. Elasticity of demand refers to the measurement

of the quantity of demand of a service to change in price. If there is an increase in pricing lead to
increase in revenue for the industry, this means there is inelastic demand and vice versa if there
is decrease in price which lead to increase in revenue due to increase in demand for the services.
DEMAND FORECASTING – It refers to the process of estimating the expected demand from
the customers for the services in the future. It also impact the revenue of the industry. If there is
wrong forecasting of demand by the company, this would lead to decrease in revenue due to high
cost and vice versa. Thus, industry should use accurate measurement of forecasting techniques to
estimate the demand and accordingly prepare its strategies (Akan, Ata and Dana, 2015).
AVAILABILITY – Availability of inventory also impact the service of industry which in turn
impact the revenue generation. The company who have more depth and breadth of inventory at
the time of high demand rate of services, will earn more profits and generate more revenue rather
than those company in the industry who don’t have much inventory at the time of demand for the
services by the customers.
P2 Application Of Revenue Management Tools To Generate And Maximize The Profits
Hospitality industry is part of a large enterprise which is known as the travel and tourism
industry. It is one of the oldest industries in the world. Today the industry and their services have
changed and expanded in the eras. Revenue management is a technique for optimizing revenue
earned from a definite, perishable resource. The challenge is to sell the right customers to right
resources at the right time. Revenue management implements the basic principles of supply and
demand economics in a strategic way to generate incremental revenue.
There are three essential techniques to apply for revenue management:
• There is a certain amount of resources available for sale.
• The resources that have been sold are bad. This means that there is a time limit for
selling resources, after which they struggle for value.
• It is that different customers are willing to pay a different price for using the same
amount of resources (Pavlova, 2017).
Revenue management is particularly high relevance in those cases where the fixed cost is
relatively high compared to the variable cost. There are less variable costs, the more earned
revenue will contribute to overall profit. In other words, revenue management tries to maximize
revenues by managing a high occupation and lower room rate (customers of vacation) versus low
occupancy and high room rates among business (business clients).

LO2
P3 Stages Of HR Life Cycle And Importance In Retaining And Developing Talent
HR Life cycle is a human resource management concept which is also known as
employee life cycle. It explains all the stages which start with an individual to join the company
and end with their exit from the company and roles played by HR team at every stage.
There are various stages in HR Cycle applied to “tourism manager” job which are
mentioned below –
RECRUITMENT – Recruitment is the process of notify to the potential employees who wants to
become tourism manager in TopDeck Company. The role of HR team of the company is to
finding a capable employee who can become good manager in future for the company.
SELECTION – Selection is the process of hiring suitable employee from the pool of candidate
according to the requirements of Tourism manager. The role of HR team in this stage is to
conduct interviews accurately and fairly (Bratton and Gold, 2017).
TRAINING & DEVELOPMENT – it is the opportunities for the potential managers to learn and
acquire the managerial skills which make him better manager. Role of HR team is to give him
full opportunities to grow and never discriminate between employees on the basis of
opportunities.
TRANSITION – Transition is the process of leaving the company due to many reasons such as
getting better opportunities from better companies or completion of particular age of retirement
etc. Role of HR team is to ensure that the procedure of the transition should be followed by all
policies mention by the company (Cascio, 2015).
IMPORTANCE OF HR LIFE CYCLE IN RETAINING AND DEVELOPING TALENT
Without manager, no company can organize its business function properly. Thus, it is
necessary for the company to hire good manager and retain in the company. For the long term
retention, company also gives him opportunities to improve its talent in order to do better
performance. Also, retention and development make employees feels that they are important for
the company and also retention reduce the cost of hiring employees too.
P4. Development Of Performance Management Plan, Techniques To Resolve Negative Behavior
And Retention Issues
PERFORMANCE MANAGEMENT PLAN
It refers to the pre-determining the set of activities which ensures that goals are met
effectively. It basically focuses on the performance of tourism manager. Development of
performance management plan for the Tourism Manager involves various processes. These
processes are as follows –

PLANNING – In this process, company will pre-determined the objectives that have to be
achieved by tourism manager. To achieve that objective, company will also decides its
objectives, roles, duties and responsibilities.
MONITORING – In this process, company will do constantly measuring its performance with
the decided goal in order to monitor the performance and provide feedback if there is any
deviation.
DEVELOPING – In this process, company will give manager promotion and with that
responsibility, roles, duties and workload also increase. If there is requirement of new skills to
perform, company will give training to the manager.
RATING – It refers to the evaluation of the manager performance against some standards and
criteria and accordingly assign performance rate.
REWARDING – It means providing incentives and recognition to the manager for his
contribution in completion of tasks and for the better performance. It is done to motivate
manager to do better work in the future.
TECHNIQUIES TO RESOLVE NEGATIVE BEHAVIOUR
To resolve negative behavior, company can make code of conduct in which what kind of
behavior is acceptable and what kind of behavior is not acceptable must clearly mention. That
code of conduct must be followed by every employees and managers of the company. Manager
of company should stop being bias towards its employees. Employees and managers both should
effectively listening to each other and also effectively communicate with each other with the help
of right amount of eye-contact, posture, gesture and space between them (DeCenzo, Robbins and
Verhulst, 2016).
TECHNIQUES TO OVERCOME WITH THE EMPLOYEE RETENTION ISSUES
To retain the employees for the longer time in organization, manager should give
attention to all employees and give recognition to all those employees whose performance is
good. Manager should respect all the cultures and values of the employees and don’t
discriminate between them on the basis of values, cultures, perceptions and attitudes etc.
LO3
P5. Explore The Legislation Follows By Travel And Tourism Industry
Following legislation must be adhere by Topdeck Company in the travel and tourism
industry –

CONSUMER PROTECTION ACT 1987 – This act provide guests guidelines such as conversion
of holiday heaven turns into holiday hell due to company’s fault. Also they can claim against
company if due to company’s mistakes, service lead to death or damage or injury.
EQUALITY ACT 2010 – According to this act, company and employers can’t discriminate
between employees and guests on the basis of following characteristics such as age, disability,
gender, reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or
beliefs, sex and sexual orientation (Carr, 2016).
HEALTH AND SAFETY AT WORK ACT 1974 – As the travel and tourist business, it is the
responsibilities of the business to take care of the guests. Not only guests, but also company has
to take care of the employees, employers and operators. This act imposes some duties and rules
on employees and employers which they are obliged to fulfill. Also they have to use all the
instruments, techniques, tools and mechanisms which are made for the safety of the guests.
DATA PROTECTION ACT 2018 – It is the company’s duties to protect the personal data of its
customers. The personal data are as follows – bank details, contact numbers, house detail and
any other information etc. Also, the information provided by the company and guests should be
accurate and sufficient
LICENSING ACT 2003 – It deals with the permissions and licenses for the running of the travel
and tourism business. The operator business hire must fulfill the eligibility criteria as mention in
this act. If company provides rental accommodation to the guests, for that they need to take
permission from the local council. Same goes with meals if company wants to provide it to the
guests (Taylor and Emir, 2015).
P6. Impact Of Company, Employment And Contract Law On Business Decision Making
CONTRACT LAW
Contract is an agreement between the two or more parties (company and guests) in which
rights and obligation of both the parties is arise and these rights and obligation is enforced by the
law. The guests and the travel company must know that they are legally bound with each other.
Under the contract act, the travel company have right to claim the payment and consumer have
also right to claim the compensation if the travel company is not fulfilled his promise. A travel
company must also communicate the terms and conditions of the contract to the guests.
If Company don’t fulfill its obligation, it is considered to be breach of contract
which lead company to bear legal expenses as well as compensate the another party with whom
company did contract. This cause to damage of brand image of the company. Thus, company
should think about the terms and conditions of the contract and then enter into the contract.
EMPLOYMENT LAW

Employment law is the combination of rules, regulations and laws that define the
relationship between employees and employers. These laws cover when and how employer can
hire employee, when the employees can work and what should the pay, employer must pay to the
employee for the work. Major laws such as Minimum wages law, Overtime pay law, family and
medical leave law, Safe Working Law and labor relations law etc come under the employment
law.
These laws provide company guidelines for conducting and operating its business in the
legally framework of the nation. This would lead company to operate its business smoothly
without any legally and politically issues. Also, accounting policy, code of conduct, payment
policy, employee policy and company policy make by HR team keeping regulations in the mind
(Walsh, 2015).
COMPANY LAW
It is also known as corporate law or business law or enterprise law. It is the law of
governing the rights, companies and its operations and financial aspects of the company. Also,
company also has to register its business with the company houses.
Failure to meet with the company, it can have serious consequences for business. Along
with changing your company's legal status, which can make you vulnerable to lawsuits,
government agencies can audit, impose a fine, or break your business completely (Painter and
Holmes, 2015).
LO4
P7. Different Types Of Financial Statements And Reporting Mechanism
FINANCIAL STATEMENT
Financial statement refers to the statement which is prepared by Topdeck Company in
order to manage its financial position and disclose these statements in proper way. Company
prepares financial statement to get to know about its financial conditions and financial position
of itself and to comply with the laws imposes by government. There are three types of financial
statements which are prepared by the company (Penman, 2016). These 3 financial statements are
as follows –
INCOME STATEMENT
It is a statement which represents the revenues and expenditures of Travel and Tourism
Company over a particular year. Topdeck Company issues this statement quarterly, half-yearly
and annually. It determines the profit and loss of the company throughout the year.

BALANCE SHEET
This statement is a summary of the company which represents the financial position of
the company over a particular period. It consists of assets, liabilities and equities of owners. It is
used by shareholders, investors, suppliers and creditors to analysis the company’s financial
position. Company issues this statement quarterly, half-yearly and annually.
CASH FLOW STATEMENT
Cash flow statement is a statement which shows flow of cash and cash equivalents of a
travelling and tourism company. It is prepared by the enterprise every quarterly, half yearly and
annually. It involves both inflow and outflow of cash, inflow means receipt and outflow means
payment (Easton and Sommers, 2018).
Cash flow statement is divided into 3 activities-
1. Operating Activity- It is the principle revenue generating activity of a company. Selling of bus
tickets and income received by giving cars or vehicles on rent are some examples.

2. Investing Activity-It is the activity which involves acquisition of long term assets in the firm.
Purchase of bus and vehicles are examples for the same.
3. Financing Activity-It is the activity which involves change in size and composition of the
company’s capital and borrowing of the enterprise. Purchase of shares of debentures of other
company can be sited as an example.
REPORTING MECHANISM
Reporting mechanism is a system used by TopDeck Company. It is a system in which
principles and concepts are given which helps company to prepare the financial statements such
as income statement, balance sheet and cash flow statement. It is important for the company
because it helps company to decide and maintain the financial policy and accounting standards.
Also it helps investors and creditors to understand its financial statements easily.
P8. Importance Of Budget And Identification Of Variance
Budget
A Budget is a financial plan for a particular period which is basically of one year. It is
like a financial blueprint of a company. It includes making budget for sales, revenue, cost,
expenses and many more. Budget may include both surplus and deficit, surplus when incomes
exceed expenses and deficit when expenses exceed incomes (Wildavsky, 2017). In other words,

it is basically the sum of money to be used for a particular purpose and it is the final summary of
all expenditures along with the methods to meet them.
Importance of Budget in business performance are-
A budget helps us to figure out the long term goals of the firm and to work towards them.
It ensures that we do not spend the amount of money that we do not have. An appropriate budget
helps us to prepare for the emergencies of business. An effective budget helps us to draw the
light on our bad spending habits. It helps us to lead a happy future and to grow in the long term.
Budget Variance - It is a financial concept which shows the difference between the budgeted
amount ( revenues and expenses ) and actual amount ( revenues and expenses ). It can be of two
types –
FAVOURABLE - It is considered to be favorable when the actual revenue is higher than
budgeted revenue and also when the actual expenses are less than the budgeted expenses.
UNFAVOURABLE - It is considered to be unfavorable when the actual revenue is less than
budgeted revenue and also when the actual expenses is higher than the budgeted expenses.
Budget variance can be happen due to wrong assumptions or improper planning of budgeting or
change in budgeting policy or change in economic conditions of the company. Most commonly
used variances by company are as follows – Purchase Price Variance, Labor Rate Variance,
Material Yield Variance and Volume Variance (Van der Stede, 2015).
CONCLUSION
From the above study, it has been summarized that for the successful operation of
company, there should be successfully operations of all departmental activities such as Revenue
management , Human resources management, Accounting Management and Legislation
Management. In the hospitality industry, Travel and Tourism sector is the oldest and popular
industry. Along with this industry, other industry such as hotel industry and automobile industry
and nation gets its revenue, which makes country’s economy growth.

REFERENCES
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