Financial Management in Travel and Tourism Sector: A Detailed Analysis

This report delves into the financial aspects of the travel and tourism sector, focusing on the significance of cost and volume in financial management, with a case study on Merlin Entertainment Plc. It explores various pricing methods like market-led, value-added, cost-led, discount, and return on investment pricing, and analyzes the factors influencing profit, including seasonal variations, political and economic environments, and social changes. The report also interprets financial accounts, including revenue, cash flow, and operating profit, to assess the financial performance of a restaurant company, highlighting trends and areas for improvement. The analysis aims to provide insights into effective financial strategies for the travel and tourism industry, supporting informed decision-making for sustainable growth and profitability. The document is contributed by a student to be published on the website Desklib, a platform which provides all the necessary AI based study tools for students.

FINANCE AND FUNDING IN TRAVEL
AND TOURISM SECTOR

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Need of cost and volume in financial management in travel and tourism sector..................1
1.2 Pricing method analysis in TTM sector................................................................................2
1.3 Analyse factors influencing profit for travel and tourism businesses...................................3
TASK 3............................................................................................................................................4
3.1 Interpretation of financial accounts.......................................................................................4
TASK 4............................................................................................................................................6
Attached in poster.......................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Finance and funding are the two aspects which are required for the identification of the
cost. It allows a company to keep a track of the costs incurred in the business. A venture requires
a financial planner for the effective business decisions. As a result, the management will be able
to record the financial information and data for the effectual management of the financial
operations. The report is prepared with a motive to identify the necessity of the cost and volume
in the travel and tourism sector. However, the stated document supported the study of Merlin
Entertainment Plc which deals in different segments like attractions, parks and themes. This
organization aim at attaining its goals by offering versed services to the customers. The cited
firm has focuses on business expansions and investments with a motive to attain customer
satisfaction. As a result, this document will provide an assistance to the management to adapt the
appropriate pricing method (Amekudzi, 2015).
TASK 1
1.1 Need of cost and volume in financial management in travel and tourism sector
Cost is an amount which is incurred against the purchased product. In order to produce
the demanded goods or products, there are different steps to be cleared. For an instance,
production requires raw material for which the amount id paid. In addition to this, wages and
salaries are paid to the workers in against of their services to the organization. Moreover, cost
can have huge impact on the selling purpose of a company. The present study is based on the
case study of Merlin Entertainment Plc which offers travel and tourism services to the customers.
The organization renders hotel booking in behalf of the customers and also make arrangements
for them to make their tour comfortable (Cheng and Warfield, 2005) However, all these
arrangements incur cost which is being paid by the company. Here, the management needs to
evaluate its true position by considering the cost and volume. In addition to this, the cost raise
may be direct cost or indirect cost. This can be effectually understood with the help of cost,
volume and profit(CVP) analysis. Here, the stated organization will be able to identify the sales
and cost relationship. There are certain facets of this analysis which is explained beneath
(Bromwich and Bhimani, 2005).
 In order to evaluate the profitability of a venture, this analysis can remain fruitful. It
allows the management to identify the cost incurred with reference to operations and
production.
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 The cost, volume and profit analysis assist the company to make investment and financial
decisions. In addition to this, the variable expenses incurred can be met out with the
earned revenue. The amount remained after paying the expenses can be termed as the
profit (Weil, 2012).
 The CVP analysis will allow the company to make decisions in order to expand and grow
in different sectors. In context to this, the managers will be able to make smart moves in
terms of cost and investment.
 Besides this, the managers will also be able to evaluate the whole economic image to the
banks and other parties from which the funds are taken.
The operations of the companies get improved with the adaption of funds. Whereas, fixed
cost remains unchanged for the long period which depicts that tourism sector may face risks. The
relation of risk is directly related with the sales and if it falls then it will result in generating
losses. The cited company has adopted the CVP analysis so that effective business and
investment decisions can be made. The renowned firm offers several services to the customers
that shows an unchanged sales mix (Srivastava, 2015).
1.2 Pricing method analysis in TTM sector
As increase in the population people are tended to rise in the travel and tourism. Merlin
Entertainment Plc is important because it helps in developing the countries by making the
money. So on that basis it is important to take the decision on pricing. Pricing is also a method
helps in execute the value of the product and services. There are different pricing in the
particular product which attract the customer. That is why price plays an important function in
the company. If proper method are applied by the Merlin Entertainment Plc the it will survive in
the competitive market (Shim and Siegel, 2008). The various method of pricing are :-
 Market-led Pricing – this is the set of both the penetration and skimming pricing method
so that the company get more advantages using both the method. In penetration pricing
method company can set the low price so the people attract more as possible but the
company have to manage the production pricing in the competitive environment. On the
other hand the skimming pricing method also use the Merlin Entertainment Plc . In this
company have to set the price at very high level this generally use to get the maximum
profit. This two method also known as the competition pricing and customer based
pricing (Clotfelter, 2013).
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 Value added pricing – for getting the customer satisfaction the Merlin Entertainment
company use this method. Merlin can provide the services to the people and entertain on
the same price as per the agreement of the company. This method give satisfaction to the
company as well as the customer. Company can gets the high profit where as people get
the entertain. By using this method try to create the demand of the people which tend to
rise in the profit making (North, 2013).
 Cost led price – this is the another method of pricing where the Merlin company use in
the business. The company set the cost according to the business and set the price above
the margin of the business. Firstly the company calculated the break even point and then
set the cost. The break even point is calculated to get the maximum profit of the
company. The cost can be fixed and variable. This method help to analyse the
expenditure of the company.
 Discount pricing – Merlin Entertainment Plc also use the method of discounting. If the
company want to get the profit discount the price in the off season so the more people
come and enjoy the discounted price. This method are applied the company to attract the
customer. Generally people get attracted more towards the discount in now a days
because now the strategies of the people is going towards the saving. Discount the price
as per the business so the company maintain the position and able to achieve the target.
Where on the other hand give satisfaction to the people (Shim and Siegel, 2008).
 Return on investment pricing – this is also one of the method of pricing where the in
which the price set according to the rate of return or the investment rate. The Merlin
company set up the price according to this method.
1.3 Analyse factors influencing profit for travel and tourism businesses
Tourism also expressed in the form monetary form
Seasonal variations – one of the factor is influencing the profit is seasonal variation. Seasonal
provide many of the perception which make the bad impact on the company. The Merlin
Entertainment Plc get influences by the seasonal. If the off season is there then the people is
hesitate to make the decision regarding the tourism. If the vacation is their then the company gets
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more profitable (Shim and Siegel, 2008). The factors which impacting the profit in tourism
business are :-
Political environment - sometimes the rules and regulation of the countries make influenced in
the business. The policies of the different government make impact on the travel and tourism.
The positive change in political leads to stable the country and people enjoy the tourism. Where
as the negative change in the politics leads to the country unstable where discourage to the
people in tourism.
Economic environment – the impact like water quality, wildlife, air quality are influence the
people to make decision regarding to the tourism . Merlin Entertainment PLC get influenced
when the economic condition are not good. All these factors make the effect if it is not suitable
for the people. Economic environment also have the positive impact on the company. If the
ecosystem of the place is proper then people take interest in tourism (Phillips, 2013).
Social environment – tourism can get change or may be go on the loss if the social cultural
change take place. Social is totally concerned with the people lifestyle. Where as different
culture also make the impact on the company. They make change in the experience, values, the
way of living etc.
Planning – in the Merlin Entertainment Plc company planning are not properly it will effect the
tourism so make ensure to do proper planning (Shim and Siegel, 2008).
TASK 3
3.1 Interpretation of financial accounts
In the stated sector, there are different financial transactions are done which have huge
impact. According to tourism activities, the organizations needs to consider the financial
statements and trading and p&l for the measurement of financial position of the sector. Adaption
of these statements will allow the travel companies to identify the exact profit and loss position.
Additionally, with the help of these statements the organization will be able to take effectual
decisions with reference to further investments. In concerned to restaurant Plc, the financial
accounts of this company helps in maintaining the data and classify the company information.
The managers of this firm analyse the financial accounts for the effective decision making of the
company (Schalatek, 2012).
Interpretation of 2015 to 2014
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The revenue of restaurant Plc has been hiked up with 7.9% which depicts that the
management has improved its services with the adaption of corrective measures. In addition to
this, the yearly revenue of this venture is raised by 9.4% as compare to the prior year and also the
operations revenue of this restaurant is hiked by 10.5%. Besides this, the interest costs are
reduced in 2015 (Sexton, 2012). On the basis of comparison with the last year the average tax
decreased up to 22 %. on contrary to this, the revenue was increased by 9.6% in the year 2014.
This increase was due to the growth in sales of 2% has resulted in launching of the new sites. In
context to this, the operating profits of this company was also hiked which has improved the
position of this restaurant. The declared facet was some other aspect which consequent in
accelerative the expenditure of the concern widely therefore decreasing the total lucrativeness
inside the industry. It was also evaluated that addition in the domestic minimal pay and
adjustment labour activity conditions were the main reason. As compare to the lase year the rate
of taxes are higher up to 23%. This resulted in hike the EPS of 29.96p, an increase of 6.9% on
the prior year. However, it can be interpret that the organization is improving in some facets and
still needs alterations so that it can attain its goals and objectives (Sexton, 2012).
Financial accounts of Restaurant plc in 2014 Cash flow- The cash flow statement explains the incoming and outgoing of the cash
transactions during the year. With the help of this statement, the organization is able to
ascertain the position of cash during the year. As per the cash flow of 2014 of this
restaurant, there is a hike of 7% was seen. In addition to this, the free cash flow is also
raised up to 11% which resulted in positive outcomes for the company. In 2014, the
organization's operating profit was hiked by 80.5% form 74.9 in the previous year. The
depreciation of the company was also raised by 37% (Hansen, Mowen and Guan, 2007).
Financial account of restaurant plc in 2015
 Cash flow- Restaurant plc cash generation is again very strong which is increasing 13%
in the 2015. Its operation cash flow is 135.5% which has increased in 2015 by
10.5% .Company's operation case has increased because its after development capital
expenditure of £55.1m, £32.Company's net debt reduced by £10.2m in the year to
£28.4m at year end (Drahokoupil, 2012).
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2015 2014
Operating profit 87 79
Operating cash flow 134 124
Free cash flow 96 84
Net cash flow 9 2.2
TASK 4
Attached in poster
CONCLUSION
On the basis of present report, it can be depicted that finance and funding plays a crucial
role for Merlin entertainment Plc. The organization has used different pricing methods which has
provided an assistance to the company to adapt the effective method of pricing. In addition to
this, the CVP analysis has aided this company to identity the actual position of this organization.
Besides this, use of different management accounting information sources has helped this
company to make appropriate investment decisions. As a result, the organization is able to
improve its strategies and plans for the attainment of future goals and objectives.
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REFERENCES
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Shim, J. K. and Siegel J. G., 2008. Financial Management. Barron’s International.
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Srivastava, V., 2015. Project finance bank loans and PPP funding in India: A risk management
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