Finance & Funding Dynamics: A Deep Dive into Travel & Tourism

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, focusing on key aspects such as cost and volume management, pricing strategies, and factors influencing profitability. It explores various management accounting techniques, including budget reports, job cost reports, and cost allocation reports, and assesses their utility in decision-making. The report also interprets travel and tourism financial accounts using ratio analysis and examines the sources and distribution of funding for capital projects, using the Carnival Corporation & plc and Dalata Hotel Group as case studies. It highlights the importance of effective financial planning and management in achieving business objectives and ensuring sustainable growth in the competitive travel and tourism industry, emphasizing the need for accurate cost analysis, strategic pricing, and sound investment decisions.

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Finance and Funding in the Travel and
Tourism Sector
Student Name:
Course:
Submission Date:

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Table of Contents
Introduction......................................................................................................................................3
Task1................................................................................................................................................4
1.2 Explain the importance of cost and volume in financial management of travel and tourism
businesses....................................................................................................................................4
1.2 Analyze pricing method used in the travel and tourism sector..............................................5
1.3 Analyze factors influencing profit in travel and tourism sector............................................7
Task2................................................................................................................................................8
2.1 Explain different types of management accounting information that could be used in travel
and tourism business....................................................................................................................8
2.2 Assess the use of management accounting information as a decision- making the tool.......9
Task3..............................................................................................................................................10
3.1 Interpret travel and tourism financial accounts...................................................................10
Task 4.............................................................................................................................................13
4.1 Analyze the sources and distribution of funding for the development of capital projects
associated with tourism..............................................................................................................13
Conclusion.....................................................................................................................................15
Reference.......................................................................................................................................16

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Introduction
Finance and funding is a vital concept because travel and tourism business requires the
appropriate amount of capital and time for the business in order to realign the growth of the
business towards achieving its business objectives and goals for the betterment of the economy.
Travel and tourism are just like any other business which requires a good investment in order to
gain more profit and therefore financial management concept are vital in the entire business
activities (Guliani & Rizwan, 2016).When the industries that are dealing with travel and tourism
business are organizing their activities, then cost volume and profit analysis is done together with
the right pricing strategy. As a business sector whose concern is based on profit making the
factors that are constituting profits are given priority in financial analysis. Business is operated
under a good accounting management and the organization has to deliver investment report to
avoid any problem that may arise in relation to those regards. Interpretations of the travel and
tourism company can be well done using ratio analysis. The travel and tourism companies are
exploring the entire world and therefore, they need sufficient funding for the projects.

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Task1
1.1 Explain the importance of cost and volume in financial management of travel
and tourism businesses.
The business is finding its analysis by getting the cost and volumes of the business on how it
relates to the breakeven point. In order to do findings that are regarding the manner in which cost
and volumes are done in an organization, there are a number of assumptions that will be used in
these findings (Vogel, 2016). The major assumptions are variable, the units are all sold, and sales
assumptions while some costs such as fixed costs remain constant. Travel and tourism analysis
helps in financial planning and financial control for Carnival Corporation & plc:
 Carnival Corporation & plc plans its future needs in prior and makes the analysis of their
plans in order to keep good records. Doing prior planning will help in facilitating
decision making in an organization in order to avoid confusion in the future.
 The tool is effective since it will guide in a breakeven determination that will help the
organization to work out their profit gain and to avoid losses in the Carnival Corporation
& plc.
 Travel and tourism companies are also aiming for a better performance just like other
organizations and therefore they have to put in place other costs such as variable costs,
fixed costs together with costs such as sales, volume, cost and all the relevant financial
data that will contribute for the growth of the business.
The method mentioned above is simple to use because all data applied can be analyzed by using
the formula to derive an answer. No extra efforts will be required n the use of this method hence
it is the better tool for use.

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1.2 Analyze pricing method used in the travel and tourism sector
Due to changing the word, business activities are growing highly of which traveling and tourism
industry is not left out. People are exploring different parts of the world, and the booking of the
traveling means has changed whereby internet system booking is mostly applied. The tourism
industry is an important industry for many nations since there is good revenue collected and that
revenue helps in the development of those nations. In order to build the industry of travel and
tourism, a good decision will be needed so that the business can expand such that those nations
which have invested in tourism sector such as the UK can earn more profit (Bilgin, 2015).
Marketing principles are key important in an adoption of pricing in the tourism industry since
business decisions will factor in the business location, ratings of the business and the brandings
of the particular business. In doing business, Carnival Corporation & plc have an intention of
making profits and therefore pricing method is important because it will cover the cost of doing
business and the profit that is expected to be earned in the business. In order to get the selling
prices which can make tourism organization to earn profits, the profit margin should be added on
the cost of doing business so that the amount earned as profit can help in the future expansion of
the business. There are different pricing methods that can be applied in the travel and tourism
sector in order to earn the profit for an organization.
Market-led price- Pricing for goods and services will be determined by penetration and
skimming pricing. In penetration pricing, an organization will set their prices slightly lower than
the prices of their competitors so that customers can be influenced by the cheap price.
Penetration pricing is used to fight for the place in the market where competition is stiff.
Skimming pricing is a situation where an organization sets higher prices of their goods and
services because they have more advantages into the market than their rivals and therefore
customers will still buy from them and not the other organizations.
Profit led pricing- In this pricing method, there are two types: one is competitive pricing and the
other one is customer based pricing. Competition pricing is whereby the prices of the goods and
services are set depending on how the competitors have set their prices while customer based
prices is a situation whereby an organization or travel and tourism industry will set their prices

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while the factor in the will of customers to buy at that particular prices. So the prices are set in
relation to customer demand for goods and services of a particular tour and travel industry
(Buhalis, et. al., 2012).
Return on the investment pricing- In this case, pricing will be determined based on the interest
rates and returns on the investments. The amounts that are earned on the investments and the
interest rates will determine the pricing of an organization.
Cost led pricing- The prices of the goods and services will be controlled by the cost and
volumes of an organization or business entities. Business will calculate the breakeven point in
order to determine the profit earned.
Business organizations earn more profits that enable them to grow towards their goals and
objectives if they calculate their pricing method well. Business can earn good profits if they keep
in mind the factors that affect business profits such as volume, costs, margin and breakeven
point. They will determine the success or the failure of the business opportunity.

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1.3 Analyze factors influencing profit in travel and tourism sector
Proper management of travel and tourism business strategy will enable the business to earn more
profit that can help in business growth. Carnival Corporation has got their good planning in a
proper manner that can be implemented to accelerate the profit earning of an organization.
Tourism business can travel to far end nations and nearby nations doing advertisements and
promotions regarding the qualities of the services that they offer. Proper advertisement and
promotion will ensure that business has achieved well in profit earning that can help the business
to expand into various areas (Eurasia Business and Economics Society, 2015). The tourism
business expenses need to be determined because chances are there that high transport cost then
margin profit will go down. Carnival offers a better accommodation facility because tourists do
spend days while they go for the tour and that helps in earning more profit for the business.
Carnival trip evaluation- accommodation and airplane cost in carnival hotel is 60000 dollars, in
that amount, 150 dollars is charged for the meals and treated as the variable cost. If 90 tourists
have visited carnival hotel then the total variable cost will be 150*90 which 13500 dollars are.
Now the total cost will be variable cost plus fixed cost which amounts to 73500 dollars.
Business charges are 800 dollars for a tourist which sums up to 72500 dollars. That shows a
1500 dollars lost by the business. In order to earn 10000 dollars for the business, it will charge
927.77 dollars for each head. That will be profitable pricing.

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Task2
2.1 Explain different types of management accounting information that could be
used in travel and tourism business
Management accounting in business activities helps in keeping the business accounting records
so that any problem that arises in the business can be easily solved out. This accounting
management is important in the business because it keeps the business records updates in order
to avoid losses can easily occur in the business fraternity. Here are examples of the management
accounting that are used in Dalata Hotel Group in the UK.
Budget report- the estimated budget that will be incurred in the future is recorded in the budget
report. The budget report will then facilitate planning for Dalata hotel group effectively.
Job cost report- areas of the business that earns the profit are focused on so that the business will
operate without wasting time on none profitable activities/ projects. The aspects through which

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the organization can make profits are analyzed in order to make changes that increase the profit
of an organization.
Cost allocation report- the business does the allocation for every resource that is available at the
early stages of the business setups so that in the future there would be no ambiguous situations
that can be detected (Vogel, 2016).This will give management an opportunity to work on the
operating system of the business and keep their records in order to avoid any negative outcome.
In context with the Delta Hotel Group, the business had a plan to earn 10000 dollars from the trip
to Newcastle city but the planned budget and the actual amount used was so different as if the
business charged 800 dollars for each tourist then it would suffer a loss of 1500 dollars that was
counted as a loss. An evaluation that was done found it that the management of the company was
so poor to an extent that the company had to replace. In that case, Dalata hotel had to review
their techniques so that they can reinforce accounting management for an organization.

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2.2 Assess the use of management accounting information as a decision- making the
tool
Here are various different management accounting techniques that are used in accounting
decision making. These accounting techniques are used by large farms and small firms. Among
these techniques are:
Payback period- this method is used by the small business organizations to calculate cash flows
in an organization. it shows the time with which Dalata hotel group will be able to pay back the
amount that was invested in the company. Dalata should invest in areas that help the company to
earn more from their investments such as accommodation, tour etc.
Discounted cash flow- this is a discounting rate under which the company will receive the return
from the future value in the present scenario (Karasavvoglou, et. al., 2018). Travel and tourism
companies can make wrong decisions a time in their management accounting and therefore it is
important for the organizations to use best methods to reduce the losses to the full extent.
Accounting rate of return- when the company has invested some capital in the business, it
expects to earn more than invested. The different amounts of money that were invested and the
amount that was earned is the return. Dalata Hotel Group estimated to earn 10000 dollars but
looking at things, the business would incur the loss of 1500 dollars. For an organization to
control such losses, the best techniques should be involved.
Investment risk and sensitivity analysis- every business opportunity that is about to be taken by
Dalata hotel have got various types of risks that are likely to occur. In order to avoid such risks,
the company has a role to find a better ways of dealing with such risk.

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