Financial Management, Funding and Analysis in Travel and Tourism

This report provides a comprehensive analysis of finance and funding within the travel and tourism industry, focusing on two key companies: Carnival plc and Dalata Hotel Group. It delves into the importance of cost and volume in financial management, examining direct, indirect, variable, and fixed costs, as well as volume analysis techniques like break-even analysis and economies of scale. The report explores various pricing methods used in the sector, including cost-led pricing, price-led costing, seasonal pricing, rack rates, contribution margin-based pricing, market-based pricing, and last-minute pricing. Furthermore, it analyzes factors influencing profitability, such as seasonal variations, political and economic environments, and bad debts. The report also covers management accounting information, investment appraisal, and the interpretation of financial accounts, including cash flow statements, trading accounts, and balance sheets. Financial performance metrics for Dalata are presented, including current ratio, acid test ratio, return on capital employed, return on net assets, and net profit ratio. Finally, the report discusses different sources and distribution of funds for capital development in travel and tourism.

Finance and Funding in
Travel and Tourism

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of costs and volume in financial management...................................................1
1.2 Pricing methods used in travel and tourism sector................................................................3
1.3 Analysis of different factors which influence profitability of travel and tourism................4
TASK 2............................................................................................................................................5
2.1 Different kind of management accounting information which used in tourism sector.........5
2.2 Assess the use of investment appraisal management accounting information as decision
making tool..................................................................................................................................5
TASK 3............................................................................................................................................5
3.1 Interpretation of financial accounts to assist decision-making.............................................5
TASK 4..........................................................................................................................................14
4.1 Different sources and distribution of development of capital projects...............................14
CONCLUSION..............................................................................................................................17
REFERENCES .............................................................................................................................18

INTRODUCTION
For a business organisation, financing and funds are required to get effective growth and
capital management for long term period. This is an essential need for a company to manage
liquidity in their equity bridge and capital related terms (Evans, Stonehouse and Campbell,
2012). Finance and funding is a process of firm that is used to convert short term fixed interest
debts into long term fixed interest debts. This project report is based on two different
organisations such as Carnival plc London, England and Dalata Hotel Group. Carnival plc
London is the world’s largest leisure travel company with a portfolio of cruise brands in North
America, Europe and Australia and they have 10 different global cruise line brands as well.
Dalata Hotel Group plc is the Ireland’s largest hospitality firm. They have almost 38 three and
four star hotels with over 7,700 rooms. This in industry is operate Clayton and Maldron Hotels
across Ireland and UK. This report represents the cost and volume in financial management as
well as importance of revenue in decision making process of organisation. At last, it includes an
effective analysis on different sources and distribution of funds for capital development for travel
and tourism.
TASK 1
1.1 Importance of costs and volume in financial management
Financial management is an effective process that is used for planning, organising,
controlling and monitoring of financial resources to achieve organisation's goal and objectives
easily. These type of practices are used for controlling finance and fund activities such as
acquisition and utilisation of funds, management of accounting and payment related activity, risk
assessment as well as other money related terms. For Carnival plc, it is required to make plane
and control all the financial matters of organisation effectively. Costs and volume in financial
management is required to fulfil the future needs that are used to plan and analysed in an
effective manner in travel and tourism industry (Henderson, 2010). This process helps to get
effective and correct decisions so that organisation would not face negative changes for them
loss may occur. There are various type of costs as given below-
Direct cost – This type of cost includes all the expenses done on manufacturing and
production process of various goods and services of organisation. For travel and tourism firm
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like Carnival plc, it is an essential requirement to manage all these costs in an effective manner
to gain higher growth and maximum profit easily.
Indirect cost – These types of costs are difficult to assign or identify because it is not
directly calculated on products and services. Indirect cost may be fixed or variable. Theses cost
are not identify with a specific project and organisation activity but they directly impact on
benefit and sales activities of both terms.
Variable cost – These types of costs are changeable according to various alterations of
outputs. Variable costs are fluctuates every year acceding to various changes in organisation.
This is directly affect on financial structure of company and its funds or pricing related terms as
well. Variable cost are increased and decreased according to company's production activity
(Heung, Kucukusta and Song, 2011).
Fixed cost – These type of cost does not change according to various alteration such as
increase and decrease in amount of goods and services of organisation. Fixed costs are directly
effect on various expenses of a company that they used to paid. In other hand fixed cost do not
change when quantity of output are changed.
Allocation and apportionment – These types of costs are not directly related to labour
and material of organisation. This type of overhead can be made in amount of expense are
incurred by particular department of cost centres.
Volume - This analysis is used to determine amount of products and services in an
organisation. There are various components used to analyse volume effectively such as -
◦ Break even analysis – This process is basically used to forecast the cost and sale of
business that will be working for upcoming period. It can be managed on monthly,
quarterly and yearly basis. In this process, organisation starts increasing their profit
after covering all costs of the firm (Nielsen and Spenceley, 2011).
◦ Economies of scale – This process is basically used to gain competitive advantages
from the target market. According to this process, cost of new producing units should
have to less when organisation already produce many units at a time. This is divided
into two specific economic scale such as internal and external.
◦ Diseconomies of scale – This process is basically used for economic concept that
refers to a situation in which economic scale cannot perform for a long time in firm.
This is based on managerial cost process in which cost of various products is
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decreased and outputs are increased effectively. For Carnival plc, it is an essential
need to improve their cost and provide effective outputs to visitors to gain higher
success in the future.
1.2 Pricing methods used in travel and tourism sector
For an organisation, it is an essential requirement to manage their cost effectively to sale
their products and services in an appropriate manner. By using pricing method, an organisation
can easily gain effective revenue after selling their products and services in target market and
customers. In this process, organisation can easily make various changes in their process such as
-
Cost led pricing – This is a most common technique that used by various organisation to
cover overall cost of production services. In this firstly organisation analyse their overall
production and manufacturing cost and then they adding their revenue or profit that they want to
earn from future. In this process organisation manage their cost and activities according to
customers a capacity to pay for services and products. Carnival Corporation use this method to
provide effective package to tourist and visitors for attracting and connecting them for a long
time (Papatheodorou, Rosselló and Xiao, 2010).
Price led costing – This process is used by Carnival Corporation and plc to providing
effective services to their customers who can easily paid any amount. In this process organisation
easily cover their overall cost for their services and products that they offer to customers. In this
process Carnival corporation and plc earn effective cost and revenue from market and customers.
These type of process only used by well-known organisation who have trusted customers and
they ready to pay any amount for their services.
Seasonal pricing – This process is used by travel and tourism organisation because they
cannot keep same price of their offers and services. Price of their offers are changed according to
customers demand and various season. In this type of business organisation, money and cost
related terms can not be fixed for a long time, they need to use flexibility in their pricing and cost
as well (Pike, 2012).
Rack rate - For travel and tourism sector as Carnival corporation and plc these rate
helps to manage their marketing activity and service prices at a fixed cost for tourist and visitors.
But this cost can not be the last cost of organisation because they need to make various changes
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according to season and customers demand as well. For this, organisation manage their financial
accounts according to their service cost.
Contribution margin based pricing – This process is not based on fixed cost method
because their approaches are determine set price and variable cost per unit. Travel and tourism
sector organisation such as Carnival corporation and plc used variable cost method to attract
more customers toward their organisation to get their services easily.
Market based pricing – This type of rates are based on competitive organisation that
already exist in market and provides same services to customers. For this organi9satin need to
analyse market and customers demand and make their cost more effective and attractive for
customers to get higher revenue easily (Pocock and Phua, 2011).
Last minute pricing – It is based pricing method of organisation that used to sell
products and services of organisation. In this process company fixed their rate according to daily
bases and they provide flexibility in them.
1.3 Analysis of different factors which influence profitability of travel and tourism
Travels and tourism sector face various changes in their profit and revenue due to some
environmental changes and different variation in customers demand as well. For them various
factor such as economic, political, social environment factor directly affect on their cost and
service amount as well. There is a specific detail of those factor such as-
Seasonal variation – This factor is directly affect on process and [policy of travel and
tourism sector. For Carnival corporation & plc this factor provide them a analysis to make
various change in their cost or service charges according to seasonal changes. In off season these
typr of organisation can not earn higher revenue of their services and huge amount of visitors,
that is why they earn all their revenue in on season when they get a effective amount of tourists.
Political environment – In this process government policies and their legislation are
directly affect on travel and tourism sector. For Carnival corporation & plc this factors help them
to make long term effective plans for visitors and their own organisation (Ritchie and Frechtling,
2010).
Economic environment – This factor is related to economic factor of organisation that
can affect on its growth. For a business organisation it is very important that their products and
services impact positively on economy and people.
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Bad debts – This factor is negatively affect on organisation and its money related terms.
In this process money and investment of organisation can not be recovered easily and they
provide negative impact on financial activities of company.
TASK 2
2.1 Different kind of management accounting information which used in tourism sector
(Covered in PPT)
2.2 Assess the use of investment appraisal management accounting information as decision
making tool
(Covered in PPT)
TASK 3
3.1 Interpretation of financial accounts to assist decision-making
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