Finance and Funding in Travel and Tourism Sector: A Detailed Report

This report delves into the critical aspects of finance and funding within the travel and tourism sector, using Carrib Happy Tours Company as a case study. It begins with an introduction to the necessity of finance and funding for success in the market, followed by an examination of Cost-Volume-Profit (...Read More

Finance and Funding in
Travel and Tourism Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Concept of CVP analysis and importance of financial management....................................1
1.2 Analyse pricing methods which helps in determining the price for different trips...............2
1.3 Factors which influence the profit of firm............................................................................3
TASK 2............................................................................................................................................4
2.1 Different type of management accounting information........................................................4
2.2 Analyse the use of investment appraisal technique...............................................................5
TASK 3............................................................................................................................................6
3.1 Interpretation of financial accounts of Thomas Cook...........................................................6
TASK 4............................................................................................................................................7
4.1 Analyse the sources and distribution of funding for the development of capital projects....7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
In each and every sector, finance along with the funding is necessary to accomplish the
success in the market. For providing the better services to the consumers, employees require
funds so that they can attain the aims.. Finance is a field which can help the firms in doing the
investment in the market. In travel and tourism sector, when tourist having funds with them then
only they can visit the different places and reap the best experience (Buckle Your Seatbelts:
Funding to Travel Tech Startups Skyrockets In 2015, 2017). The present report is based on
Carrib Happy Tours Company which is planning for the summer holiday trip. In the below
mentioned assignment, discussion based on the concept of cost and volume profit analysis.
Moreover, importance of financial management is to be discussed.
TASK 1
1.1 Concept of CVP analysis and importance of financial management
CVP stands for cost and volume profit evaluation is a instrument of cost accounting
which is concerned and also having an impact on the level of sales of the firm along with the cost
of merchandise which should be vary according to the production of units and that will provide

the operating profit. This analysis is only reliable when cost of the product is fixed in all the
levels of production. It is a tool and technique of accounts which is concerned with the influence
of sales volume along with the cost of product on the operating profit of Carrib Happy Tours
Company (Evans, Stonehouse and Campbell, 2012). It deals with the revenue of the firm which
having an affect on the variation in the variable, fixed cost along with the sales price per unit of
the merchandise. This analysis having distinctive assumptions which includes:
 All cost of the products can vary whether it is fixed or variable cost.
 Sometime sales price of the product, variable cost of inventory as well as fixed cost of the
stock remain constant while manufacturing the merchandise.
 All units which are produced by the employees of the business entity to be sold in a
effective manner.
In the travel and tourism sector, the funds are required which involves variable cost of
flights, cost bookings of hotel as well as other costs (Forno and Garibaldi, 2015). Cost and profit
analysis assist in managing the funds of the firm and this tool is adopted by Carrib Happy Tours
Company so that the staff members can do proper planning to generate maximum revenue. For
the stated analysis, tools can be used which includes Break even point as well as evaluation of
contribution margin. CVP techniques is computed by using the formula:
Px = Vx + FC + Profit where,
P is selling price per unit
V is variable cost per unit
X is total number of units produced
FC is total fixed cost
The importance of this analysis in the financial management of travel and tourism
industry includes:
 It aid in analysing the profitability as well as productivity of the company (Standing,
Tang-Taye and Boyer, 2014).
 It assists in doing the comparison among the different business of travel and tourism.
 It aid in forecasting the future plans and also helps in making the correct decisions with
the changes in the various levels of the operations in Carrib Happy Tours Company.
 This analysis helps the business entity in controlling the cost of the products.

1.2 Analyse pricing methods which helps in determining the price for different trips
It is necessary that operators or the person who are conducting the holiday trip have to
demonstrate the price by adopting the appropriate and relevant price strategies so that they can
charge correct cost from their tourist on the trip. Each and every business in the competitive
market wants to remain and for that they have to provide the best services and also generate the
more revenue which will assist them in maintaining the position in the market when they are
facing the high competition (Destination funding models: Can the tourism industry collaborate to
solve its own funding challenges?, 2017). So, the manager of Carrib Happy Tours Company
have to adopt the appropriate pricing policies which will helps in controlling the cost and earn
profit. There are some pricing strategies or methods which manager of the firm can use that
includes:
 Cost oriented pricing: It is a method which assist in setting the price according to the cost
of production so that they can attain the goals and objectives. It adds the constant
percentage which paid to the retailer for each product (Leung and et. al., 2011).
 Transfer pricing: It is a type of price which help the employees of the firm and in this
they can do the transactions in each and every division of Carrib Happy Tours Company.
 Target pricing: It is price level which is based on projects up to the financial security by
the investment analyst. It also assists in attaining the best results.
 Market oriented pricing: It help the managers of the firm in comparing the similar
products and services which being offered in the market by the competitors.
 Going rate pricing: It is a common practice which is related to the homogeneous products
and in this among the different prices there are having the little variation from one
producer to other (Dwyer, Forsyth and Dwyer, 2011).
Carrib Happy Tours Company is doing planning for holiday trip to Carribean and in this
they are charging the cost from the tourist for both air-planes as well as accommodation for
hotels that is £60,000. Variable cost which is to be charged that is £200. If firm is using cost
oriented method for pricing then this will aid in providing the best margin and generate
maximum profit. Moreover, if they are using market oriented pricing tool then it assist in doing
the comparison in the prices of various competitors which they are providing to consumers and
also helps in attaining the success for the long run.

1.3 Factors which influence the profit of firm
There are so many factors which having a adverse influence of profit of travel and
tourism sector and also Carrib Happy Tours Company business are:
The employees of the business entity have to use the effective strategy of management so
that they can not face any issue in generating more revenue and it denotes as a best tool or
technique for them. The staff members of Carrib Happy Tours Company have to do proper
planning and also should be formulated in a appropriate manner. Then only they can get the
chance or opportunity to earn maximum revenue and on the basis of that they can deliver the
better services to their visitors (Vance and et. al., 2011).
The employees of the firm have to do proper promotion or advertisement so that they can
promote the services and according to that they can attract large number of tourists in the
competitive market. This type of marketing planning is important and necessary so that they can
accomplish the goals and objectives and reap success in the market as well as improve the profits
and maintain standards.
In the business of travel and tourism sector, expenses which are associated with the
travelling also important which needs to be determine as it is having the less chances that if the
charges of flights or any bookings of hotel as well as transport fare is high then profit margin is
low.
The managers or employees of Carrib Happy Tours Company have to provide a better
accommodation facility which is helpful in generating more profit. (Eagles, 2014). Visitors and
tourist have to control their prices which can be easily affordable to all of their clients. In this
concern they might face some problems and issues on which management have to work hard and
resolve them as soon as possible.
According to the given information of Carrib Happy Tours Company that the cost related
to hotel accommodation and charges of flights is £60,000. Along with this variable cost is £200.
If there are 100 tourists who want to join the holiday trip then total variable cost £20000. Total
cost includes fixed or variable which is charged from them is £80,000. But Carrib Happy Tours
Company is charging only £800 per tourist so total amount which they can charged from the
visitors is £80000. It means company is in the break even situation that means no profit no loss.
But firm wants to earn profit so they have to charge above £800 which help them in generating
more revenue (Spencer and Zembani, 2011).

TASK 2
2.1 Different type of management accounting information
The various accounting information systems which are used commonly are:
 Budgets- The management should provide complete information of a company's budget
so that institution can plan for all their activities by keeping it in their mind which are
necessary for budget preparation. CHTC should provide its budgetary information to all
the management level employees such that they can plan out the activities accordingly.
 Forecasting- Managers should have to provide all relevant information about each and
every department to authority by keeping in view the previous segment. These results
may be positive or negative based on the performance of the employees of the
organization (Pentelow and Scott, 2011). Cited company should consider past data and
then on such basis of that data collected they can analyse the present results. CHTC
should provide the past data of its operations to all the employees of the company so that
they can look upon the performance of company and can generate belief accordingly.
 Operational systems- The company should provide its operational information to all their
investors, creditors and management of company in terms of getting large amount of
financial support for them. Creditors should have to analyse all the relevant information
properly so that they can take effective decision which is not consider as the part of loss.
 Financial reporting- It means that all the financial informations that are required for
growth and development of business enterprises must be provided to all the investors
such that they can provide financial help to the company (Kennell and Chaperon, 2013).
The financial information must be provided to all the financial institutions in order to take
loan from these institutions.
 Tax management Systems - All the taxes which are required to be paid by the company
must be evaluated by the tax manager on the basis of of previous records of all the
employees and then on the basis of financial statement of employee the tax manager
decides how much amount the individual needs to pay. The company should provide
complete information related to tax liability to the tax manager in order to analyse the
amount of tax which has to be incurred by the employees.
 Annual reports- It means that the management providesan annual reporting of all their
operations which facilitated by company to target consumers so that every consumer

who is directly or indirectly related with company must know about its position. Users
should know about the annual reports of the company's working structure so that any
investment which needs to be done must be evaluated for its success or failure
propagation (Messerli, 2011).
2.2 Analyse the use of investment appraisal technique
There are different investment appraisal techniques which can be used by the business
entity to invest their funds in the projects which helps in increasing the capital so that they can
obtain profit. So, by using the different tools and techniques they can analysed the profit which
they are earning which includes:
Pay back period: It is the type of investment appraisal technique and it can be taken in
use by the small business as it assist in doing the better as well as proper control on the cash flow
of the firm instead of profits. It aid in computing the specific time which helps in generating
more revenue from investment (Lipman, 2011).
Discounted cash flow method: It is also a tool which assist the investors in making the
correct decision related to the investments. This instrument includes the discounted return which
aid in earning profit by using the future value in the present case. By using the management
accounting the employees of Carrib Happy Tours Company sometimes made any type of wrong
decisions which helps in maximising the loss of the firm.
Accounting rate of return method: It is also a type of appraisal technique which helps in
increasing the investment. It is a financial ratio which is used in the capital budgeting. It includes
the concept of time value of money. It assist in computing the return and it is generated from the
net income of proposed investment related to capital (Evans, Stonehouse and Campbell, 2012).
It should be calculated in a percentage form. It is a easy and simple approach which succour in
completing or performing the task in a proper manner.
Investment risk and sensitivity analysis: It includes the risk which is related to the
investments which is to be made in an effective manner. Along with this risk related to
investment should be analysed or evaluated so that any type of risk can not affect the growth of
the business and the return which they are associated with it.
So, these are the instruments which they have to opt and by this they can generate more
revenue. Along with this it aids the investors in making the correct decisions for increasing their
capitals and attains the success in the competitive market.

TASK 3
3.1 Interpretation of financial accounts of Thomas Cook
Thomas Cook is a company which helps in providing the better services related to travel
and tourism. It is a travel agent and it operates the branches throughout the UK and also in the
other countries (Forno and Garibaldi, 2015). A financial interpretation of the accounts of the firm
is:
Ratios 2015 2016
Profitability ratios
Return on assets
Return on equity
Liquidity ratios
Current ratio
Quick ratio
Investment ratio
Earning per share
Equity ratio
0.39
7.84
0.55
0.45
0.02
3.49
0.19
3.40
0.57
0.56
0.01
2.70
There are different type of ratios which company can use to measure the performance
and also to be computed which includes profitability, liquidity as well as investment ratio.
Profitability ratio helps in analysing the capacity of the business so that they earn the maximum
profit which was incurred from the cost (Standing, Tang-Taye and Boyer, 2014). It includes the
different ratio includes net profit and gross profit etc. There are two proportion which they are
computing includes return on assets and return on equity and the rate of return on assets is
decreasing in 2016 in comparison to 2015. In return on equity is also decreasing in 2016.
Liquidity scale is that ratio which helps in identifying the asset of the company that is
cash. It includes the two type of proportion that is current or quick rate. These ratios assist in
determining the short term ability in its possession. Current scale is increasing in 2016 that is
0.57 and in 2015 is 0.55. Quick ratio is also increasing from the 2015 to 2016 that is 0.45 to 0.56.
Investment ratio is that which defines the ability of the company to earn the maximum
profit which assist in attaining the goals and objectives. For analysing the perspective of

investments distinctive ratios to be computed which includes earning per share, debt equity ratio
etc. Earning per share which helps in accordance with the ordinary shares. This ratio decreases in
the year 2016. Equity ratio of Thomas Cook is also decreasing from 3.49 to 2.70. The employees
of the business entity have to use appropriate policies for the betterment of the company so that
they can attain the goals and objectives and also reap in success in the market (Leung and et. al.,
2011).
TASK 4
4.1 Analyse the sources and distribution of funding for the development of capital projects
Carrib Happy Tours Company has to use the appropriate sources to attain the funding and
it incurs the loss by conducting the holiday trip to Caribbean and for the same they require funds.
There are different sources of funds whether it is internal or external which assist in constructing
the hotel. Distinctive sources are:
Loans: It is a thing a person borrowed from other person and pays some amount in terms
of interest against that the borrowings. It is a factor through which an organisation can operate
their business in an effective manner. It is always in the terms of money so that all required
activity get done with the help of lean amount. There are various type of loans through which an
individual can start the operation through which it can make its life easy and appropriate (Dwyer,
Forsyth and Dwyer, 2011).
Retained earnings: It is a part of profit which a business again invests into their trade.
Retain earning is helpful as per the business purpose because it can be invested after the all
deduction of dividend and necessary payments.
Equity: These are the assets of a business which help the organisation in doing the
different operational activities. There are mainly two types of assets which includes fixed and
variable. Non moving assets are those which provide the long term interest and do not get
changed according to course of time but on the other hand variable property are those which get
easily changed and moved according to the need of time.
Distribution of the funds is also necessary and for that they have to maintain proper
budgets. Along with this employees of Carrib Happy Tours Company have to take proper loans
so that they get funds and according to that they become successful in delivering the best
services to their tourists (Vance and et. al., 2011).

CONCLUSION
Form the above carried out analysis it has been interpreted that they require appropriate
resources as well as funds which helps in providing the best products and services to their
tourists and according to that they become able to attain the goals and objectives. The employees
of Carrib Happy Tours Company have to use appropriate pricing strategies which assists in
determining or demonstrating the price of holiday trips to Caribbean. Along with this they have
to use proper system of management accounting which aid in recording the data or information
about their consumers and by that the employees of the business entity cannot face any issues in
generating more revenue.

REFERENCES
Books and Journals
Dwyer, L., Forsyth, P and Dwyer, W., 2011. The travel and tourism competitiveness index as a
tool for economic development and poverty reduction. Strategic Management in
Tourism, pp.33-52.
Eagles, P. F., 2014. Fiscal implications of moving to tourism finance for parks: Ontario
provincial parks. Managing Leisure. 19(1). pp.1-17.
Evans, N., Stonehouse, G and Campbell, D., 2012. Strategic management for travel and
tourism. Taylor & Francis.
Forno, F and Garibaldi, R., 2015. Sharing Economy in Travel and Tourism: The case of home-
swapping in Italy. Journal of Quality Assurance in Hospitality & Tourism. 16(2). pp.
202-220.
Kennell, J and Chaperon, S., 2013. Analysis of the UK Government's 2011 tourism policy.
Cultural Trends. 22(3-4). pp.278-284.
Leung, D and et. al., 2011. Asian wave in travel and tourism research. Journal of Travel &
Tourism Marketing. 28(2). pp.196-209.
Lipman, G., 2011, April. tourism & travel: IN THE GREEN ECONOMY. In International
Trade Forum (No. 2, p. 28). International Trade Centre.
Messerli, H. R., 2011. Transformation through tourism: Harnessing tourism as a development
tool for improved livelihoods. Tourism Planning & Development. 8(3). pp.335-337.
Pentelow, L and Scott, D.J., 2011. Aviation’s inclusion in international climate policy regimes:
Implications for the Caribbean tourism industry. Journal of Air Transport Management.
17(3). pp.199-205.
Spencer, J. P and Zembani, P., 2011. An analysis of a national strategic framework to promote
tourism, leisure, sport and recreation in South Africa: tourism, leisure, sport and
recreation. African Journal for Physical Health Education, Recreation and Dance.
17(2). pp.201-218.
Standing, C., Tang-Taye, J. P and Boyer, M., 2014. The impact of the Internet in travel and
tourism: A research review 2001–2010. Journal of Travel & Tourism Marketing. 31(1).
pp.82-113.
Vance, C.M and et. al., 2011. Building global competencies through experiential coursework in
international travel and tourism. Journal of International Education in Business. 4(1).
pp.30-41.
Online
Buckle Your Seatbelts: Funding To Travel Tech Startups Skyrockets In 2015. 2017. [Online].
Available through: <https://www.cbinsights.com/blog/funding-travel-tech-startups/>.
[Accessed on 3rd June 2017].
Destination funding models: Can the tourism industry collaborate to solve its own funding
challenges?. 2017. [Online]. Available through:
<https://destinationthink.com/destination-funding-models/>. [Accessed on 3rd June
2017].