Report on Finance and Funding in the Travel & Tourism Sector

This report provides an in-depth analysis of finance and funding within the travel and tourism sector, focusing on cost-volume-profit analysis, pricing strategies, and factors influencing profitability, using Carnival Corporation & plc. as a case study. It examines various pricing methods and their application in the travel industry. The report also explains the types and uses of management accounting information for decision-making. Furthermore, it interprets the financial accounts of Dalata Hotel Group plc. for 2017, comparing its performance with 2016 using key financial ratios such as profitability, liquidity, and debt ratios. Finally, the report analyzes the sources and distribution of funding for capital projects associated with tourism, highlighting their importance for economic growth in the United Kingdom.

Unit-2 Finance and Funding in travel and
tourism sector
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Contents
Introduction:...............................................................................................................................3
Task 1.........................................................................................................................................4
P1.1 Analyse the importance of cost and volume in travel and tourism business taking
Carnival Corporation as the case study..................................................................................4
P1.2 Analyse the pricing methods used in the Travel and tourism sector.............................6
P1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc. cruise brands as your case study.............................................................8
Task 2.......................................................................................................................................10
2.1 Explain the types of management accounting information that can be used in the travel
and tourism business............................................................................................................10
2.2 Measure the uses of management accounting in the decision making...........................17
Task 3.......................................................................................................................................21
3.1 Interpret financial accounts of Dalata Hotel Group plc. for the year ended 31st
December 2017 showing at least two years performance (for example comparing 2017 to
2016)....................................................................................................................................21
Task 4:......................................................................................................................................27
4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism........................................................................................................27
Conclusion:..............................................................................................................................29
References................................................................................................................................30
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Introduction:
The finance and funding in travel and tourism sector is crucial in order to continue the
efficient and effect8ve operations of the business. The type of industry is exposed to many
risk factor and the profitability is affected by many factors in this sector therefore it is
required to carefully analyse the various sources of funding and the cost of acquiring these
sources as a funding option. The report will help in demonstrating the use of significance of
cost volume profit analysis in the business of travel and tourism and the pricing strategies
which can be adopted can be effectively understood. The second part of the report will
involve a presentation in which use of management accounting in preparing and managing
the report will be analysed. The third part of the report will be associated with interpretation
of financial statements of the company for the year 2017 and the report will also include a
leaflet demonstrating the various sources of funding that can be utilized for developing the
capital projects.
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Task 1
Introduction:
The report will help the users in demonstrating the use of various techniques of cost volume
analysis, pricing strategy in travel and tourism industry and in the company Carnival
Corporation & plc. Which is the travel company operating in United Kingdom for several
number of years.
P1.1 Analyse the importance of cost and volume in travel and tourism business taking
Carnival Corporation as the case study
The technique cost volume profit analysis is the method by which the variability of profit of
company can be recognized and evaluated in reference to the change in volumes and the cost
structure of company. The analysis will provide a detailed description about the cost changes
in regard to change in level of activity for the company. In context of Carnival Corporation &
plc. The same can be utilized for the purpose of deciding the optimum level of activity that
can be performed by the company in order to achieve highest advantage (Peavler, 2017).
Types of costs:
Direct costs – The direct costs in reference to Carnival Corporation & plc. can be associated
with the type of cost that can be directly attributed to a single product or service of the
company in travel and tourism sector. These types of costs will include direct labour utilized
etc.
Indirect costs – These are the type of costs which are associated with producing the products
and services but can’t be directly attributed to a single product or service of the company.
Thus the type of costs has to be allocated based on some reasonable criteria and this will help
in recognising the appropriate costs. Example – Staff Salary, Rent expenses etc.
Cost classification based on cost:
Nature Description
Fixed cost The fixed cost is the type of costs that do not
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change with the change in the level of
production and it remain the same throughout
the period. Example of these costs includes
rent expenses etc (Peavler, 2017).
Variable costs The variable cost refers to the type of costs
that change directly with the change in
volume of production. The same will be
proportionate with the level of activity
performed in the company.
Cost volume profit analysis:
The type of evaluation provides a detailed description about the effect of changes in cost
volumes on the operating income and the net income of the company. It helps in determining
the breakeven point at the various sales volumes and cost structures achieved by the company
and the same can be utilized for the purpose of making decisions in the company. The cost
volume profit analysis includes an assumption that the sales price and the fixed cost and
variable cost will remain constant as per unit.
Application of cost volume profit analysis in Carnival Corporation & plc. – In context of
Carnival Corporation & plc. the evaluation of cost volume profit will help the business
mangers in identifying the breakeven point at which cost and profit will be appropriate and
the same level of activity will be achieved by the company in future.
Breakeven chart:
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(Source – Ready Ratios, 2018)
P1.2 Analyse the pricing methods used in the Travel and tourism sector.
The pricing strategy when adopted correctly will help the company in optimising the prices of
the products and accordingly customer satisfaction and profitability will be increased for the
company. The company Carnival Corporation & plc. is operating in travel and tourism sector
and offers a wide range of cruise brands and products which will help in generating revenues
for the company (Laudon & Laudon, 2016). The business managers need to choose an
appropriate policy which can bring enough revenues for the company while maintaining high
level of standards.
Pricing Strategy Use in context of Carnival Corporation &
plc.
Cost plus pricing The type of costing strategy will include
determining the cost associated with product
and then adding up a suitable margin of profit
that can help the company in achieving
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sustainable success.
Value based pricing The pricing strategy of the company will be
concerned with determining the value of
services or products offered and the
establishing the prices based on those
observations.
Marked led pricing The determination of prices in this pricing
strategy will include considering the various
competitor and market factors and analysing
the prices that are prevailing in the market for
similar products (Peavler, 2017).
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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.
Factors Explanation in context of Carnival
Corporation & plc.
Political factors The political factors in determining the
profitability of company operating in travel
and tourism sector will include the various
legislations and political announcements
which can affect the mind-set of individuals
visiting those places.
Seasonal factors The travel and tourism industry is highly
affected by seasonal variations concerned
with the company and this requires
determining the prices appropriate according
to season.
Social factor The social factors will involve interactions
with colleagues, friends and family members
who an advice regarding the decision of
making plans of travelling (Laudon &
Laudon, 2016).
Current rends The current trends will affect the decision in
a way that customers will opt the attraction
which is currently trending in the company.
Conclusion:
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Therefore it can be concluded that cost volume analysis together with determination of
contribution margin will help the company and business mangers to take important critical
decisions.
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Task 2
2.1 Explain the types of management accounting information that can be used in the
travel and tourism business
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The training objectives concerned with introducing management accounting as a management
tool for decision making is associated with taking important decision in this sector and
utilizing appropriate sources of funding.
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