Financial Analysis of Travel & Tourism: Funding & Profitability

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, emphasizing the importance of financial management and various funding sources for industry development. It explores the role of management accounting information systems, applying tools and techniques to Dalata Hotel Group Plc to illustrate complexities and organizational scope. Task 1 delves into cost and volume importance using Carnival Corporation & plc as a case study, analyzing pricing methods and profit-influencing factors. Task 2 explains different types of management accounting information relevant to travel and tourism businesses, assessing their use as decision-making tools for Dalata Hotel Group plc. Task 3 interprets the financial accounts of Dalata Hotel Group, while Task 4 analyzes sources and distribution of funding for tourism-related capital projects, providing conclusions and interpretations throughout. This assignment is available on Desklib, offering students valuable insights and resources for their studies.

Assignment – Finance and funding in
Travel and Tourism sector
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Table of Contents
Introduction....................................................................................................................................4
Task 1..............................................................................................................................................5
Introduction................................................................................................................................5
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism business using Carnival Corporation & plc as your case study. (M3)...................6
P1.2 Analyse pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc. (M2).....8
P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study. (M1)...................................................9
Task 2:...........................................................................................................................................11
P2.1 Explain different types of management accounting information that could be used
in travel and tourism businesses using Dalata Hotel Group plc as your case study.........11
P2.2 Assess the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc...........................................................................................................17
Task 3............................................................................................................................................19
P3.1 Interpret the financial accounts of Dalata Hotel Group..............................................19
LO4:..........................................................................................................................................26
P4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism...........................................................................................................26
Conclusion....................................................................................................................................28
References.....................................................................................................................................29
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Introduction
The central theme of the report depicts the significance of finance as well as funding for travel
and tourism sector. An attempt has been made to explain the fact that development of travel and
tourism is equally important. There are various sources to gain and attract finance which is
essential for the promotion of this sector. Management accounting information system plays a
crucial role in the growth of travel and tourism sector. For this purpose, various tools of
management or planning information system can play a significant part. The report tries to cover
various aspects associated with the travel and tourism sector. For better understanding and
knowledge, tools of management accounting information system have been applied to Dalata
Hotel Group Plc, company operating in the tourism sector. This instance will help to understand
the complexities and scope of organizations operating in the travel and tourism sector. Besides
this, several conclusions and interpretations have been given at appropriate places throughout the
report.
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Task 1
Introduction
This report depicts the use and implications of management accounting information system in
the decision-making process. It tries to list factors affecting the price of companies operating in
the tourism sector. For this purpose, the cost-volume relationship has been discussed. For the
ease of understanding, an example of Carnival Corporation & plc has been explained. Thus, this
report will facilitate a better understanding of significance and pros of management accounting
information system in the financial management of companies operating in travel and tourism
sector. An additional knowledge of pricing methods will assist in understanding it better.
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P1.1 Explain the importance of costs and volume in financial management of travel and
tourism business using Carnival Corporation & plc as your case study. (M3)
According to Dogra, (2016), financial management has its own significance in every company
whether small or big and whether manufacturing or service oriented. For this purpose,
knowledge of cost and volume is a prerequisite. For practical understanding, an instance of
Carnival Corporation & plc has been covered.
Importance of costs and volume of travel and tourism business
Some of the major advantages of costs and volume in financial management that Carnival
Corporation & plc will enjoy in the long run are as follows:
 Since Carnival Corporation & plc is the world largest travel leisure company, proper
classification and segmentation of costs are very important to maintain its dominance in the
market. Bifurcation of costs will improve the operating performance of the organization.
 An in-depth study of cost and volume components will facilitate the better understanding
of financial performance of the concerned business enterprise. As such, stakeholders will get
satisfied.
 According to Georgescu, (2015), proper analysis of the cost of each and every tour
package will help in the determination of profitability of individual travel and tour package. As
such, Carnival Corporation & plc can easily determine the package which is not profitable and
can make suitable and appropriate changes to make it profitable. Break-even analysis is one of
the most important tools for cost analysis as it helps at the minimum cost that needs to be
charged or recovered from the tourists or travelers.
 Generally, companies engaged in tour and travel business spend a major proportion of
their expenditure towards advertising and promotion since they need to make the tourists aware
of their tour packages. Thus an in-depth analysis of marketing plan along with their associated
cost needs to be assessed periodically. This will help the top level managers in taking various
strategic and crucial decisions.
 Since Carnival Corporation & plc is a service-oriented organization, it is essential to
properly allocate and absorb the cost of the various services provided by the concerned
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company. Correct allocation of will also satisfy the service-users or travellers and they are
ensured that the company is charging a fair price for their customers (Georgescu, 2015).
 Carnival Corporation & plc operates in multiple nations namely, UK, Italy, and Australia,
it is exposed to foreign exchange operating exposure. It may be possible that the company is
earning foreign exchange but it is facing operating loss in the home or domestic currency. By
applying various tools of cost accounting systems will help to manage and hedge against such
operating exposure.
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P1.2 Analyse pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc. (M2)
There are several pricing methods available to a tour and travel company. Each pricing method
has its implications and suffers from various limitations and as such, every pricing method
ensures the recovery and charging of associated costs. According to Saigeetha1 & Surulivel,
(2017), selection and application of appropriation is a very cumbersome task for top-level
managers. Selecting the most appropriate pricing method depends on various factors. Some of
the widely used pricing methods that can be used in the travel and tourism sector are listed
below:
 Cost-driven pricing: Most of the service sector industries adopt this pricing method so as to
ensure the minimum desired profit. Also, this is the traditional and the oldest method since
everyone desires to recover its cost. Under this pricing method, the price of each and every
service is determined on the basis of its cost component. All the cost that has been incurred,
whether direct or indirect, in relation to the provision of that particular service is added. For
instance, there are three different brands of Carnival Corporation & plc namely P & O Cruises,
Princess Cruises and Costa Cruises. Thus, it is very important that costs of each cruise are
charged to services provided by that particular cruise.
 Market-driven pricing: This pricing method is appropriate where there is a cut-throat
competition among all the participants. Under this pricing method, the price of each and every
product, whether tangible good or service depends on the price charged by other rivals. As such,
it ensures the uniformity of price structure across all the service providers. Accordingly, Carnival
Corporations & plc first needs to determine its competitors in each and every country where it is
operating and then it should keep an eye on their price structure. Such constant review will help
the Carnival in gaining a competitive advantage over its rivals.
 ROI Based pricing: Under this pricing method, the price of every service requires determination
of the required return and accordingly revenue is fixed. Carnival Corporation & plc manages
different brands and each brand owns and controls individual ships. It is essential to determine
the cost structure of each ship and hence price is determined and hence price is determined. This
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pricing method ensures the identification of indirect cost that can be controlled or minimized if
proper care is taken.
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P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study. (M1)
There are various factors that influence the amount of profit of travel and tourism business. Some
of the factors affect positively while other factors may have a nominal effect. However, it is
imperative for the tour company to consider all the factors while determining the price of new
service or tour package. Ignorance of a single factor may bring disrepute to the tourism
company.
Some of the influential factors that influence the profitability of travel and tourism businesses are
listed below:
 Internal organization: According to Kizielewicz, (2016), internal organizational structure or
working of the concerned travel and Tourist Company is one of the major factors influencing
profit. Good level of cooperation and understanding among all the departments or segments of
Carnival Corporation & Plc will help to understand the cost structure of other departments or
segments and as a result better and a reasonable price can be arrived at. Also, such proper
coordination will assist in a reduction or elimination of unproductive time.
 Seasonal fluctuations: Corporates providing tours and travel service will have to face seasonal
cycle. These organizations earn a good amount of profit during the peak seasons. On the other
hand, during the off-season, it has to struggle and find difficult to earn a higher profit. As a
result, Carnival Corporation & plc can keep its price higher to the extent possible during the peak
seasons so that it can earn maximum possible profits.
 Macro-environmental factors: There are various macro environmental factors which affect
greatly or largely the tours and travel business. These factors may affect the price of any
provision of service as well. As such, these factors influence all the corporates engaged in the
tourism sector. Another interesting feature of such macro factors is that these factors may be
positively welcomed by some tourism company while for other companies, it may create havoc
and they find it difficult to deal with it. Some of the major external factors that may force
Carnival Corporation & plc to change or amend its existing pricing policy are the political
environment, technological environment, legal environment and so on.
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 Other factors: Besides the above-listed factors, there are several other factors as well ignorance
of which may create difficulty to Carnival Corporation & plc to survive. Such factors mainly
include the number of bad debts, concessions or discount in the promotional tour package, the
extent of competition and likewise. For instance, if the amount of bad debts of Carnival group is
increasing year by year, then it will have to create more provision in relation to debtors. As a
result, the profit will be on the verge of declination.
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Task 2:
P2.1 Explain different types of management accounting information that could be used in
travel and tourism businesses using Dalata Hotel Group plc as your case study.
Slide 1
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