Strategic Finance and Funding in the Travel & Tourism Industry

This report examines finance and funding within the travel and tourism sector, focusing on management decision-making tools and their application. It highlights the significance of cost, volume, and profit (CVP) analysis in the decision-making process, emphasizing the skills needed to understand financial aspects. The report describes key management tools that enable top-level managers to make informed decisions, using examples from Carnival Corporation & plc and Dalata Hotel Group plc. Topics covered include cost analysis, pricing strategies, factors affecting profit, management accounting information, financial statement analysis, and forecasting. The report concludes with recommendations aimed at providing valuable insights for users to make sound judgments, considering both positive and negative impacts.

Finance and Funding in the Travel and
Tourism Sector
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Table of Contents
Introduction....................................................................................................................................3
TASK 1 (LO1, AC1.1, 1.2, 1.3, M1, M2, M3, D1, D2, D3).........................................................4
LO1-................................................................................................................................................4
P1.1..............................................................................................................................................4
P1.2..............................................................................................................................................5
P1.3..............................................................................................................................................6
TASK 2 (LO2, AC2.1, 2.2, M1, M2, M3, D1, D2, D3)................................................................7
LO2-................................................................................................................................................7
P2.1..............................................................................................................................................7
P2.2............................................................................................................................................12
TASK 3 (LO3, AC3.1, M1, M2, M3, D1, D2, D3).....................................................................15
P3.1............................................................................................................................................15
TASK 4 (LO4, AC4.1, M1, M2, M3, D1, D2, D3).....................................................................20
P4.1............................................................................................................................................20
Conclusion....................................................................................................................................23
References.....................................................................................................................................24
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Introduction
The central theme of the report highlights the importance of management decision making and
explanation of various tools that would assist in understanding its perspective particularly in the
travel and tourism sector. The report also depicts the significance and importance of cost,
volume, and profit in the decision-making process so as to give a glimpse of various skills that
are essential to understand the financial aspects. Besides, the report describes the major tools of
management enabling the top level managers to take a valuable decision. It will assist its users to
understand in brief the various dynamics of management decision and its applicability in most
effective manner. Certain areas of focus are properly focused throughout the project. The report
is prepared to keep in minds all the factors forming crucial element related to the tour and travel.
Some recommendation is also enclosed which will provide a useful insight to its users so as they
could make valuable judgment dealing with all positive and negative effects.
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TASK 1 (LO1, AC1.1, 1.2, 1.3, M1, M2, M3, D1, D2, D3)
Introduction
The report consists of the various cost and volume techniques and how they can be beneficial for
the Carnival Corporation & plc. The various factors are also stated in the report along with the
pricing techniques that can be used for the setting up of the price.
LO1-
P1.1.
The cost of the company includes the fixed and variable cost where fixed cost is charged as
period cost and variable cost changes with the change in the unit produced. It can be further
classified in the direct and indirect cost where direct cost is direct apportioned in the production
of the unit whereas indirect cost is not involved in the direct production cost of the product or the
services.
The volume can be analysed on the basis of break-even analysis, economies and diseconomies of
scale. The break-even volume is the point where the cost and the revenue generated are at same
level and profit is nil (Ionescu, and Dumitru, 2015). The economies of scale states with an
increase in profit there is a decrease in production cost whereas the diseconomies of income
states that the production unit decreases but excessive increase results in an increase in marginal
cost.
The cost and volume are important as with the help of the adequate volume and in case of
Carnival Corporation & plc occupancy, they can earn the maximum profit (Abdullahi, et. al.,
2017). It can help them to apportion cost and reduce it and focus on increasing the profit of the
company. It can also be beneficial in determining the occupancy they must have in order to
maintain and recover their cost. It can be useful in setting up of price and also in proper planning
and strategies formulation. This can lead to effective management of the available resources and
also in taking preventive steps for the improvement in reducing the cost involved in providing
the services.
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P1.2
The pricing is very crucial for the revenue generation and sales. It is important to set the price of
the products in an effective way. There are various pricing strategies which are stated below
through which Carnival Corporation & plc can be benefitted.
Cost led – The cost led technique is beneficial to determine the cost that is incurred for the
production or generating of the service for the consumers. It is important to cover their cost
incurred for long-term growth, therefore, making it important to know it (Dovleac, 2014). The
cost led technique can be helping them to set the price above the cost incurred or at least equal to
it.
Return on investment – The investment of the money on the project is based on the return that
can be attained from it, therefore, it is important to set the price in a way that the return can be
achieved. The company can get benefit from this strategy as their investment are very big and
also irrevocable therefor making it important to determine the cruise price that can be set and the
profit that can be generated.
Reason for making the profit – It is important to earn the profit in an organisation for the long-
term growth. It is also important to satisfy various stakeholders of the company so that they can
establish in the high markets and even globally (Carnival Corporation & plc, 2017).
Improvement can be made in the goods and services with the help of profit earned.
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P1.3
There factors that can lead to an increase and decrease in the profit of the company. They can be
internal or external. Some of the factors are as follows:-
Planning – It is important for a business to be successful that the planning is carried on
effectively and efficiently. The Carnival Corporation & plc are surrounded by various factors,
therefore, it is important to study them and respond to them in a planned way or adoption of any
wrong or ineffective policy can lead to loss of revenue and profit (Benkovskis, and Wörz, 2014).
Seasonal and trend analysis – The demand depends upon the seasons and the trend that is going
in the market. The visits to the destination are dependent on the trend and also the season in
which it is going (Zhang, and Kulendran, 2017). The Carnival Corporation depending on these
trends and season can lead to increased revenue and profit for the company because of increase
in demand.
Economic and Political environment – The economic and political environment can affect the
demand for the consumers as well the cost of the company. Good economic environment or
political environment can boom the demand and unfavorable change in political and economic
policies can lead to increase in cost such as an increase in interest rate etc.
Conclusion
It can be concluded with the report that the cost and volume can help in earning the maximum
profit. The pricing strategies can be useful in an effective setting of the service price so that the
revenue can be earned. It can also be seen that the factors can affect the demand as well as the
profit of company.
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TASK 2 (LO2, AC2.1, 2.2, M1, M2, M3, D1, D2, D3)
Introduction
The report aims to cover the aspects involved in the management accounting information. It
helps in the decision making process. For ease of understanding, a practical instance of Dalata
Hotel Group plc. An interpretation and analysis of final accounts of Dalata Group have been
covered to facilitate the understanding of the concept.
LO2-
P2.1.
Title Slide
Contents covered in the presentation:
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In the words of Kizielewicz (2016), it is imperative to understand that management accounting is
different from the financial accounting system. However, it uses various concepts of financial
accounting information system. It can also be said that management accounting information
system is broader than simply accounting information system (Kizielewicz, 2016).
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An analysis of financial statement or annual report can also help in taking various critical
decisions such as expanding or disclosure of any related tour and tourism segment.
As suggested by Tirkey & Khilkhal (2014), a careful and detail understanding and analysis of
financial statements can help in ratio analysis. Also, it can compare its performance with other
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travel industries operating in the dynamic environment. Such analysis also indirectly helps in
budgetary control and ultimately assist in the decision-making process. The basic advantage of
financial statement analysis is that it can be used by every organization. Prominent ratios that can
be used by Dalata Group are gross profit ratios, net profit ratios, price-earnings ratios (Tirkey
& Khilkhal, 2014).
With the determination of various financial ratios, Dalata group can easily gain an in-depth
understanding of the financial performance. Thus, it can be inferred that an analysis of profit and
loss account makes the working of top-level managers easy and helpful in the accomplishment of
various long-term goals of the concerned organization. Correct preparation of statement of profit
and loss is also useful for the shareholders of Dalata Group since they will be interested in
knowing Earning Price per share and profit after tax.
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Some of the widely used tools and techniques that can be used are variance analysis, zero-based
budgeting, and responsibility accounting. Since it is service based industry, usage of ABC cost
analysis and Just-in-time approach is not possible. Also, another important consideration is that
if found necessary budgets can be revised on the requirement of changing scenarios taking place
in the environment.
Correct selection of decision-making tool is essential for gaining competitive advantage and give
a cut-throat competition to its competitor. As such, any company can perform as an entry barrier
to new business enterprises.
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