Financial Management and Funding in the Travel & Tourism Sector

This report provides an analysis of finance and funding within the travel and tourism sector, focusing on key aspects such as cost, volume, and profit, illustrated through the case of Carnival Corporation & plc. It examines various pricing methods used in the industry and factors influencing profitability. Furthermore, the report explores different types of management accounting information, exemplified by Dalata Hotel Group plc, and interprets their financial accounts over a two-year period. Finally, it analyzes the sources and distribution of funding for capital projects associated with tourism development, providing a comprehensive overview of financial management in this sector. Desklib offers a wealth of similar resources, including past papers and solved assignments, to aid students in their studies.

2 Finance and Funding in the Travel and
Tourism Sector
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Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
Introduction.............................................................................................................................................4
1.1) Explain importance of costs, volume and profit in financial management of Carnival
Corporation & plc....................................................................................................................................5
1.2) Analyze pricing methods used in travel and tourism sector.........................................................9
1.3) Analyze factors influencing profit of travel and tourism business using Carnival Corporation &
plc. 11
Conclusion.............................................................................................................................................12
TASK 2.....................................................................................................................................................13
2.1) Explain different types of management accounting information used in travel and tourism business
using Dalata Hotel Group plc. (2.2).......................................................................................................13
TASK 3.....................................................................................................................................................22
Introduction...........................................................................................................................................22
3.1) Interpret financial accounts of Dalata Hotel Group plc by showing at least two year’s performance.
...............................................................................................................................................................23
Conclusion.............................................................................................................................................25
TASK 4.....................................................................................................................................................26
4.1) Analyze sources and distribution of funding for the development of capital projects associated with
tourism...................................................................................................................................................26
Conclusion.................................................................................................................................................28
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References.................................................................................................................................................29
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Introduction
The analyses in the report have been done to provide the understanding of costs, volume and
profit so that the decision of future can be taken in travel and tourism sector. This is explained
with the motive of enhancing the financial performance of organization. The methods of pricing
that can be used by the Carnival Corporation & plc are also depicted so that the
information for pricing of product can be determined. The factors that influence the profits of
Carnival Corporation & plc are also explained. The training package predicts that how the
training will be provided to non financial managers so that they can get understanding of use and
the types of management accounting systems. The ratios of Dalata Hotel Group Plc are
calculated and for practical implementation 2016 and 2017 data are evaluated. The various
sources which are used for funding is defined with the distribution of funding for the
development of tourism sector.
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TASK 1
Introduction
Carnival Corporation & plc is the world’s largest travel company with the cruise brands in
Europe, Australia and North America. It also owns the tour company which has its operations in
Holland America princes Alaska Tours. The headquarters are located in Miami, Florida.
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1.1) Explain importance of costs, volume and profit in financial management of Carnival
Corporation & plc.
The cost can be defined as the total of all the expenditures which are incurred in business during
the particular year for the production of goods and services that can satisfy the needs and
demands of customers (Rawes, 2018). There are various types of cost in Carnival Corporation &
plc which will help in increasing the revenues of business such as:
Image: Cost
Source: By Author, 2018
Direct and Indirect Cost: These are the costs which are directly attributed to the production of
goods and services such as the direct labor while the indirect cost is the cost which are difficult
to assign to specific products such as in case of Carnival Corporation & plc it will be
depreciation and the administrative cost (Rawes, 2018). The depreciation of the Carnival
Corporation amounted to be £1846 million during the year 2017.
Fixed and Variable Cost: These are the costs which remains constant in all level of output. The
amount of fixed cost in Carnival Corporation & plc is £2.12 billion. The variable costs are those
which changes in all level of sales volume (Rawes, 2018). The amount of variable expense of
commission for 2017 was £2.35 (Carnival Corporation & plc, 2018).
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FixedCostVariableCostTotalCost

The allocation and apportionment cost means the allotment of properties to the items of the cost
units. It covers the centers such as salaries and other running cost (Rawes, 2018).
Volume: The volume helps in generating the revenues for business so that the profits of Carnival
Corporation & plc can be enhanced.
Image: Volume
Source: By Author, 2018
Break Even Analysis:
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BreakEvenAnalysisEconomiesofScaleDiseconomiesofScale

Image: Break Even
Source: Knowledge Grab, 2018
The break-even point is the point where the organization is neither earning profits nor incurring
losses. This will help Carnival Corporation & plc in setting of prices which covers the fixed cost
of investment (Knowledge Grab, 2018). It can be seen if the organization has to increase the
profit so cost will be determined after the breakeven point.
Economies of Scale: It is advantage to large firms so as they have large operations which will
help them in negotiating terms with suppliers by bulk purchasing (Economics Online, 2018). The
economies of scale of Carnival Corporation & plc are £10.2 billion (Carnival Corporation & plc,
2018).
Image: Economies and Diseconomies of Scale
Source: Economics Online, 2018
Diseconomies of Scale: This is the disadvantage to the large firms as they have the complex
organizational structures and communication barriers. The losses incurred by the Carnival
Corporation & plc are 1.626% of the income amount (Economics Online, 2018).
Cost Volume and Profit Analysis
It shows the reaction of cost and profit with the change in sales volume so that the better level
can be decided by the managers. It provides various advantages to Carnival Corporation & plc
such as:
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 It helps in making better decisions for future by analyzing the cost and volume.
 It also helps in forecasting and then fixing the prices accordingly so that the revenue of
carnival Corporation can be enhanced.
 This also controls and coordinates the various activities within organization.
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1.2) Analyze pricing methods used in travel and tourism sector.
The pricing in the tourism and travel business should be decided according to the profit margin
of organization and by considering the current trends which are prevailing in market. In this the
Carnival Corporation & plc this will help in increasing the revenues of business.
Image: Pricing Strategies
Source: By Author, 2018
Demand Based Pricing: This is the pricing strategy in which the price of the product is
determined according to the demand of that product (Morgan and Pritchard, 2012). The demand
for rooms will be high during peak season so the prices will be kept high and the demand during
the off season will be low so low prices will be kept. In the Carnival Corporation & plc the price
during off season will be £325 per person and in peak season it will be £720 (Carnival
Corporation & plc, 2018).
Cost Based Pricing: The price is decided by adding profits to the initial cost so that the final
cost of product is decided. In Carnival Corporation & plc the cost per person will be kept for 5
days at £1325 after all the adjustments of profit. This is the sales amount which is decided for the
actual sales (Carnival Corporation & plc, 2018).
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DemandBasedCostBasedCompetitionBasedValueBased

Competition Based: Here the prices are decided according to the competitor’s price. When the
prices of competitor are high the price is kept low and vice versa (Morgan and Pritchard, 2012).
The competitor of Carnival Corporation & plc is Norwegian Cruise Lines so the prices of them
are set at £520 per person for the deck rooms so the Carnival Corporation & plc will set the price
at £440 per person so as to attract customers and increase revenues (Tehrani, et. Al., 2012).
Value Based Costing: The product’s cost is determined according to the value. In Carnival
Corporation & plc the rooms which are on the sea side their prices will be high and those on suits
will be low (Carnival Corporation & plc, 2018). The prices of the deck rooms will also be based
on the tourists visiting. The price of sea side is kept at £900 per day and of suits will be at £320
per person (Morgan and Pritchard, 2012).
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1.3) Analyze factors influencing profit of travel and tourism business using Carnival
Corporation & plc.
Profit means the revenue of the organization which is evaluated by subtracting the total cost from
total revenue (Morgan and Pritchard, 2012). The profits are necessary for all business so as to
increase the efficiency within the organization. The factors that may impact the profit of Carnival
Corporation & plc are:
Economic: The economic factors such as the interest rates and the income of the customer if
change in any of those factors will impact the profit of organization (Morgan and Pritchard,
2012). The income of the customers who are availing the services of Carnival Corporation & plc
increases so the demand will rise and in turn the profit will increase like 2017 the profits
increased to 1750 Crores USD.
Political: The political factors may also impact the profit like the change in tax policies and the
regulations of government the less number of the customers will be able to avail the services.
The change in the tax policy of the Carnival Corporation & plc incurred the losses of £3 billion
(Evans, et,. al, 2012).
Technological: In Carnival Corporation & plc there was the increase in profits with 63% due to
the upgradation of new technology to provide services (Evans, et,. al, 2012). This increase was
seen as the new technology attracted large number of customers and thus in turn the revenue
increased.
Social: The social factors mean the change in demography and the lifestyle of customers who are
availing the service. The change in the lifestyle impacted the profit of Carnival Corporation &
plc by 1.7% as compared to other years.
Staff: The number of the staff members also impacts the profit as the wages paid to employees
may be increased or decreased (Evans, et,. al, 2012). The staff members of the Carnival
corporation & plc increased to 1,22,000 which increased the expenses of the firm and thus the
profit was decreased (Morgan and Pritchard, 2012).
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