Financial Analysis: Funding and Finance in Travel and Tourism Sector

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This report examines the financial aspects of the travel and tourism industry, focusing on finance and funding strategies. It begins by exploring the significance of costs, volume, and profit, and then delves into pricing methods, including seasonal, cost-plus, and market-based pricing, alongside factors influencing the industry. The report further investigates various information systems used in management accounting, such as budget reports, financial statements, and variance analysis, highlighting their role in decision-making. It includes an interpretation of financial accounts and identifies different sources of funds from both private and public sectors. The report uses TUI travel as a case study to illustrate these concepts, providing a comprehensive overview of financial management within the tourism sector.
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Finance and Funding in the
Travel and Tourism Sector
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Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
1.1 Significance of costs, volume and profit in travel and tourism........................................1
1.2: Pricing methods that are use in travel and tourism.........................................................2
1.3 Factors that are influencing travel and tourism................................................................3
TASK 2............................................................................................................................................5
2.1 Various information systems to be used...........................................................................5
2.2 Use of management accounting information as a decision making tool..........................6
TASK 3..........................................................................................................................................13
3.1 Interpretation of the financial accounts..........................................................................13
TASK 4..........................................................................................................................................15
4.1 Different source of funds that are come form private and public sources .....................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18
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INTRODUCTION
Finance is the most important aspect of any business concern because without it any
operations of an industries can not be performed. As per travel and tourism industry is concern
funds are needed to fulfil people curiosity to visit attractive places that are organise by tourism
company (Evans, Stonehouse and Campbell, 2012). It will help to make people feel every
heritage and beautiful places to see. So to meet every necessary requirement of people to go from
one location to other are fulfil by tourism industry and for this they required proper availability
of funds that are meet through various sources. The main objective of this project report is to
identify different source of funds those are generated regarding travel and tourism. It includes
benefits of cost, volume and revenue to make effective decision in tourism sector and evaluation
of financial statements to generate valid outcomes. Financial statements are being used as to
make valid interpretation in increase performance and stability in coming time.
TASK1
1.1 Significance of costs, volume and profit in travel and tourism
Cost: It refer to be that value which are incurred during organising any activities or
operations in relation to any industries. It is considered as important aspect because in travel and
tourism sectors that overall cost is incurred in delivering customers services regarding promotion
and arrangement of other resources (Gibson, Kaplanidou and Kang, 2012). There are different
types of cost that are associated with tourism sectors:
Indirect cost: these are said to be that cost which are indirectly incurred in production process of
any products and services. It is summaries of Direct labour, material and other overheads. It is
require by companies to determine their total cost and labour those are needed to provided proper
support to it customers in relation to cut down extra costs.
Direct cost: It refer to be that cost which are directly impact the production units in generation
of final goods and services. Benefit to that costs are useful in functional planning tourism
industries as they are designed on the basis of master budgets that are based on future estimation
because to incurred maximum profit. It is used to make effective decision to control cost
management.
Variable cost: It is said to be that cost which are varies with production of extra unit during
development of products. According to TUI travels whose major focues is on creating such kind
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of package offers to their customers that make them attract to get them and experiences a
beautiful journey.
Fixed cost: It refer to that cost which are remain unchanged with the production of products and
services (Henderson, 2010). But in case of TUI travels certain offers regarding some location are
fixed. The main advantage to fixed costs are salary to tourist guides are fixed.
Allocation and appointment of overheads: overhead cost allocation is that cost which are use
to measure as long term cost that are applied across financial reporting duration. In other words it
can said to be that cost which are charged against that products and service which are compare
with time taken in delivering that services.
Break even analysis: It refer to be that situation in which estimation is done regarding what is to
be sells, yearly or monthly to cover our costs of running businesses and make it reach at the point
where the company get a position were no loss and profit kind of situation arises.
Economic of scale: It can said to be that stage in which a firm work in order to maximise the
profit through creating synergy which will be helpful in achieving economic of scale in coming
time.
Diseconomy of scale: Because of synergy situation arises among two firms the cost of
production increase that happens to be the reason of diseconomy of scale.
1.2: Pricing methods that are use in travel and tourism
As it has been observed that people are very prices sensitive while use the services and
products that are offer by tourism industries. It is an identical concepts because of which
different areas have different price plan and packages. So according to the demographic
segments of people pricing plan should be made in relation to effective customers as they can
enjoy their journey in more attractive and economical manner. There are various pricing
strategies use by the company to attract the customers towards them:
Seasonal pricing: It is said to be that pricing option which are made available to the customers
according to the season time. As per the demand of customer price is being set as high or low
which is said to be standard ways fro people to book their trips. It has been observed that in
every year lot of people are use the services of TUI travels as they are known for superior
services delivery. It is also divided in two parts:
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Summer pricing: Summer is said to be peak time for most of the customers as there are
almost highest number of customers who wish to visit beautiful location of different
countries. So TUI travel in that time rise the prices of packages incurred maximum profit.
Winter pricing: In this pricing concepts the demand is very low as they are having
minimum number of customers so price is low at that time so that people can use at least
some of the packages.
Cost plus pricing: In this type so pricing strategies which is use by TUI group to draw attention
of most of the people (Heung, Kucukusta and Song, 2011). It consist of various direct cost and
labour those are added to increase total percentage in relation to price in market.
Market base price: As per the demand of product in the market TUI travel offers price to it
customers. As by seeing competition in the market piece is set by TUI to match up with current
market condition.
Last minute pricing: It is use as per the requirement of the suppliers to cover gap in stock that
are available with the company. It other context it is said to be regular price that changes
according to the booking reservation of tickets and increase last minute site price.
Absorption pricing: It is said to be that methods which includes concepts of variable theroy as
cost of assets as well as some portion of fixed.
Marginal pricing: It is said to be that price which are equal to additional cost of producing one
more unit of product and services.
There are various factors those are influencing the pricing policy of travel and tourism sectors as
to make the aware that to manage there resources in most appropriate manner so that each and
every people can have the facilitates to travel from one destination to other.
1.3 Factors that are influencing travel and tourism
In relation to travel and tourism sectors they are mostly depend upon the capability to
generate maximum profit. It is important to incurred more profit as they require more finance
from external sources in order to generate more attractive environment as well as investors. It is
an important aspect of business in relation to expand their businesses in more other terms (Wong,
Mistilis and Dwyer, 2011). As it has been found that finance are most important part to operate
business without it a company can not operated. In the tourism which is one of the major part of
any country that bring most of funds to develop their country as well as to make more economic
growth. There are different advantages of generating profit to their businesses:
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In maximising profitability: The major aspect of any business concern is about increasing
profitability of the company on that basis necessary decision can be taken in order to
increase their market share.
Help to expand there business: As every business wants to expand their business so that
to earn maximum profit and growth. So TUI travel are also creating so many expansion
plan in that relation.
Those factors which are affecting profitability of the travel and tourism are:
Political factors: In relation to travel and tourism the ministry of tourism sectors are
designed a policies and plan in order to make people more comfortable to their journey
(Morrison, 2013). The TUI travel are mostly impact through taxation and inflation rate or
some times the exchange rate that are varies according to shifting of locations.
Economical factors: These are said to that factors which are impact by people of the
society as well as those people those are contribution more to the economy. TUI is
generate more revenue to the country with their services.
Social Factors: As per international tourism is concern it is designed to increase social
culture aspect of the country. The main objectives of this factors are to make a step
toward growth of the businesses. That is only possible through promotion of society by
using appropriate media.
Technological factors: In relation to current ear technologies has connected people as
such a way that people are setting at home can book their plan of journey. In that relation
TUI travel are also delivering various kind of digital facilities to their customers (von der
Weppen and Cochrane, 2012).
Legal: As per legal aspect are concern tourism sectors has to face many challenges of
government rules and regulation that are major impact on tourism sectors.
Environmental factors: As a tour operator of TUI travel there are various new things
has to be faced in the way of protecting environment. Because whatever today we have
got is all come from nature and to respect it in proper manner.
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TASK 2
2.1 Various information systems to be used
Management accounting information is identified with the inner managers and leaders.
This is an administration instrument that could assist in obtaining right business choices in
proper time. This would help out to frame legitimate reports and records which indicate exact
data in association. The key decision makers of TUI Limited to utilize this data to frame best
strategies for the organization to achieve best outcome.
There are diverse sorts of management accounting information of TUI group:
Budget report- It is basic device which utilized by the administration of the organization
to manage the manufacturing cost. Under TUI Group, the budget report is a powerful device to
build the execution of the association in an adequate way (Murphy, 2013). Under TUI group, it
would need to make the cash budget and operational spending plan as their inner answer to
indicate genuine information which could assist the firm to get the corrective measure and also
able to have the business performance.
Financial statement: It is additionally an apparatus which is utilized by the administrator of the
TUI group to make the financial decision. Administration bookkeeping characterize financial
statement which investigation budgetary execution of organization (Nielsen and Spenceley,
2011). The administrator examination entire financial statement to assess best decisions with
respect to their business execution in proper way. Directors and key managers can use financial
data at the season of settling on key choices like future venture and so on. Money related
proclamation measure organization performance and aides in ascertaining profits and loss of
firm's exercises.
Variance analysis: Management of TUI group covers variance analysis to assess the distinction
in genuine and planned conduct in an association. It is an imperative procedure to keep up
business exercises at market place. This examination is situated in the execution level of
performance exercises in business. This reflects the difference between the actual and the
forecasted data. The cited company needs to overcome the variance in a better manner.
Forecasting: Under TUI group, the forecasting procedure depends on the vision and ore set
objectives of the organization. This could characterize future requirement of the specific item
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and services that are depends on the past information of organization. Fundamentally, it is an
arranging devices that is identified with the presumption. It is additionally a basic leadership
instruments which helps is arranging, planning and future development. The cited company can
utilize anticipating at the season of allocation of spending so they can discover appropriate
measure of cash that ought to be given to an office. It will helps in foreseeing costs that
organization would be framing in future.
Management Information System- It is a successful instrument which concentrates on firm
process and data innovation. The cited company needs to frame the fundamental goal of MIS to
give input which characterize the organization execution that is investigation by the best level of
administration in an organization (Papatheodorou, Rosselló and Xiao, 2010). It assumes critical
part in association to create data with respect to TUI group. MIS is fundamental to the
administrator to take choice in proper way. This could gather each kinds of information that
influence administration of the cited cited company.
2.2 Use of management accounting information as a decision making tool
Management accounting information is a critical procedure that could render data that is
identified with the business execution (Vanhove, 2011). It enhances basic leadership process in
lengthy time-frame of period to achieve attainment. This data is vital in basic leadership process
which incorporate Relevant cost examination, ABC methods, make or buy decisions and using
the information.
There are few management accounting information which is identified with basic
leadership device for TUI group:
Correlation with the trend: TUI group decide the patterns by coordinating execution of
various years, it assist in settling on future decisions and plans identifying with those
patterns.
Forecasting sales: The top level authority characterize forthcoming solicitation of the
result of the clients which depends on the past data (Pike, 2012). In an association
determining deals identified with the vision and destinations of the organization to attain
business objectives in successful way.
Advance product and service: AMS utilized by the cited company's managers which
could assist in taking viable data with respect to the new item and services. It could be an
offer to clients to get higher fulfilment. The top level authority examine the current
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structure to characterize new item and services of the organization in proper way. Cited
company acquaint new items and servile with their customer to accomplish higher level
of fulfilment by them and achieve achievement in a marketplace.
Investment: Under this method the financial decision can be taken through analysis of net
present value and internal rate of return.
Raising capital: There are another aspect of decision-making is related with raising of
fund in the new project to expand there business in order to make more profit.
Create best item is basic to business development and furthermore increment their
gainfulness level in suitable way. Each organization needs to become their actuates in market
and clients mind, they can ready to deliver effective items to their customers (Tribe, 2015).
Merlin Entertainment build up their business procedure through advancement of items and
administration to accomplish objectives and destinations in powerful way.
Venture choice TUI group must take decisions about the ranges where they will put
resources into future. With the assistance of bookkeeping data the director of characterize
estimation of cost which is identified with return and new interest in their business association.
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