Financial Management and Funding in the Travel and Tourism Sector

This report provides a comprehensive analysis of finance and funding within the travel and tourism industry. It begins by examining the significance of costs and volume in the financial management of Carnival Corporation, a major player in the leisure travel sector, and explores various pricing methods used in the industry, including market-led pricing, cost-plus pricing, return on investment, and marginal costing. The report then delves into factors impacting the profitability of the tour sector, differentiating between internal factors such as bad debts and wage costs, and external factors like seasonal variations, political and social environments, and economic conditions. Furthermore, the report analyzes different types of management accounting information that can be utilized by Dalata Hotel, a case study, and how this information serves as a decision-making tool. It also includes an interpretation of Dalata Hotel Group's financial accounts, presenting key financial data over a two-year period, including revenue, EBITDAR, and various financial ratios such as current ratio, acid test ratio, return on capital employed, return on net assets, net profit ratio, and stock turnover ratio. Finally, the report discusses sources and distribution of funding for the development of capital projects within the tourism sector, highlighting the role of government departments and capital projects in promoting the industry.

Finance & funding in
travel and tourism

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of costs and volume in financial management of Carnival Corporation .........1
1.2 Analysing pricing methods that is used in tourism and travel industry................................2
1.3 Analysing various factors that impact on the profits of tour sector......................................3
TASK 2............................................................................................................................................4
2.1 Different types of management accounting information that can be utilised in Dalata Hotel
.....................................................................................................................................................4
2.2 Use of management accounting information as a decision making tool ..............................5
TASK 3............................................................................................................................................7
3.1 Interpreting financial accounts of Dalata Hotel Group representing its two year
performance.................................................................................................................................7
TASK 4..........................................................................................................................................15

4.1 Sources and distribution of funding for the development of capital projects ....................15
CONCLUSION..............................................................................................................................16
REFERENCES .............................................................................................................................17

INTRODUCTION
Tour and travel sector is gaining momentum throughout the time and carrying out several
set of activities and services in order to meet the demands of customers at greater extent. Cost,
volume and profit are considered as important components of all ventures which are operating
under tour and travel industry. An enterprsie comprises of complex set of activities where in
different functions are performed for accomplishing the pre - setted aims and objectives. The
present report is divided into different sections are completed by considering given scenarios. In
first section, the importance of costing and volume in managing finance within Carnival
Corporation & plc has been described. This is one of the largest leisure travelling firm in the
world. They are having a portfolio of cruise brands in Australia, North America and Europe. In
other sections, different other data has been discussed in context with management accounting
information by focusing on the case study of Dalata Hotel group.
TASK 1
1.1 Significance of costs and volume in financial management of Carnival Corporation
Appropriate management of financial assets is important in order to gain long term
advantages. Some of the essential parts of the tourism company are restaurants, hotel, bar, tour
operations, etc. Carnival plc is operating its business in different countries. They are having a
successful cruise brands that are holding a strong position in market place. The description of
business volume and costs are stated below:
 Cost: Costing consists of all direct, fixed, indirect and variable costs that incur while
carrying out business. Direct cost involves expenditures occurred regarding giving
facilities and services to their clients associated with theme park, accommodation or
resorts. Indirect costing includes arrangement of tour guide, management of regional bus
services, etc. Thus, cited venture should consider all of its expenses and do proper
management in order to manage their expenditures. By this way, they can increase their
profit margins effectively.
 Business volume: Management of Carnival Corporation ought to focus on its business
volumes at peak seasons prior to take any decisions. This has been observed that business
of tour and travel is a type of seasonal enterprise as most of the consumers used to make
plan of their holidays at the time of winter and summer vacations. Therefore, managers
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should consider their business volumes in order to formulate strategies for performing
operational activities and for making effecting cost controlling.
1.2 Analysing pricing methods that is used in tourism and travel industry
Setting proper prices is a complex job for all ventures. As there is a huge race of
competition in travelling and tour industry, therefore, Carnival corporation should adopt some
effective pricing methods for framing various tour packages in order to satisfy their clients. Key
pricing methods are stated below:
 Market led pricing method: In this methodology, company have to analyse the costs of
identical tour packages that exist in the current market place and are utilised by their
rivalries. Managers ought to evaluate prices of the services or facilities offered by their
challengers and after that they should set price according to the comparative study
between their packages of tour and the same provided by other competitors. They should
set cost of their services lower or higher from the prices of same facilities or products so
that increment in sales can be done and higher profits can be earned.
 Cost – Plus Pricing: Holland America line is one of the brad of stated corporation can
take use of this pricing strategy for setting expenses of tour packages. According to this
method, venture can do calculation of costing by taken into consideration about the direct
as well as indirect expenses. After that they should add particular percentage of profit
margins for them. They also have to compute a break - even point in order to gain
sufficient sum of profitability on their investments in business.
 Return on investment: Firm can also utilise this methodology in designing an idea of their
profit. Costs should be ascertained on the ground of rate of interest as well as return from
the investment funds that is invested in formulating travelling packages for visitors.
 Marginal costing pricing method: Apart from those methodologies, firm should decide
its prices on the foundation of marginal pricing process. As per this method, costing is
charge of a product equivalent to the additional expenses that is included in organising
another package of tour. But this procedure is commonly less used by corporations.
Besides this, company ought to concentrate on various factors such as alternation in
seasonal variation, economic, social as well as political environment etc.
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1.3 Analysing various factors that impact on the profits of tour sector
Profit can be simply defined as the financial gain that is being earned from different
operational actions. It is treated as a focal point for each and every enterprise. Like other
companies, there are several factors which are impacting on the profit margin of Carnival
Corporation & plc. It is observed that if profitability is affected, then it will also influence on the
overall corporation. These influencing features involve both internal and external factors which
are discussed below:
Internal factors:
 Bed Debts: Commonly, bed debts occur when consumers do pay amount in term of the
services taken by the venture. When those payments are not attained by the venture, then
such costing become bed debts and being charged by them in profit as well as loss
account. This in turn minimises the margin level of profit. Expenditures such as wages
and salaries are associated with the workers that would create a major section of cost of
business. If such prices will enhance, then it would surely impact on the total benefit of
the firm.
External Factors :
 Seasonal variations : Tourist attraction is completely based on the seasons as most of the
civilians plan their tour as per their vacations either in winter or summer holidays. Due to
this reasons, business volumes are changing regularly. Such seasonal or random
alternations greatly affect the income amount of company.
 Political environment : This involves change in government norms, tax related policies,
rules of foreign trades and many other legislative modifications that occurs on continuous
basis. This is impacting on the business operations of Carnival plc. Venture has to plan
their holiday packages by considering those legal policies and rules. Thus, it can be said
that such rules applied by government is also influencing the profitability of venture.
 Social environment : It includes changes in social group mobility , their living style,
population sociology, attitudes towards leisure or work, education level of communities,
etc. These all factors will provide greater impact on the working of Carnival plc.
 Economic environment : This involves modification in interest rate, exchange rates, etc.
This would affect on the monetary dealings of the business which are instantly impacting
the earnings rates.
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TASK 2
2.1 Different types of management accounting information that can be utilised in Dalata Hotel
4

2.2 Use of management accounting information as a decision making tool
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TASK 3
3.1 Interpreting financial accounts of Dalata Hotel Group representing its two year performance
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The above based graph is showing the key financial data of Dalata groups. As per this
information, the revenue is aound 290,551 in the year of 2016 ; while it is in 225,673 in 2015.
On the other hand, segments EBITDAR in 2016 is approx 120,308 and in 2015 , it is around
89,253. The various other factors such as rent, EBITDA, Net finance costs and more is
mentioned in above graph.
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Some of the important factors associated with the financial accounts are stated below :
 Cash flow statement – This statement is used for analysing cash associated terms in a
firm. This statement is performing its work in three different phases of organisation. In
first stage operation of different cash related actions like cash outflow and inflow. In the
second step, venture needs to gather several information of investment related activities.
In such stages, they can involve financial terms of extrinsic sources such as bank and
financial corporations.
 Trading account – This account manages all the activities related to business into two
variant statement that is P&L account and trading account. In income statement, firm
require to formulate details of their purchasing, credit - sale, return obtained from sales
and buying return. In P&L account complete income and expending of company are
represented via present-day data.
 Balance sheet – It is the concluding or final account of financial information that consist
of valuation of assets and liabilities on current data of organisation. At the end of this
statement should have to be to represent that valuation of assets are similar to
organisation's liabilities.
 Profit and loss account - This portion of income statement gives final profit or loss in
context to the stock - holders. This data is supplied for a determinate accounting period
and components such as wages, business office rent, lawful expenditures, etc. falls under
this section.
Measurement of Dalata's financial performance
Current ratio –
Current ratio
2015 2016
2.89 1.44
Acid test ratio -
Acid test ratio
2015 2016
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2.86 1.41
Return on capital employed –
Return on capital employed
2015 2016
5.82 4.98
Return on net assets –
Return on net assets
2015 2016
3.74 3.78
Net profit ratio –
Net profit ratio
2015 2016
9.58 12.02
Stock turnover ratio –
Stock turnover ratio
2015 2016
89.50 69.40
TASK 4
4.1 Sources and distribution of funding for the development of capital projects
Funding is comparatively essential conception which is proposed by ministry of concern
department for well-being and improvement of tourism sectors. Various sources are acquirable in
this regard:
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Department of culture, media and sports : It helps in growth of campaign, improve life styles
and boost up valuable facets which is most important in the field of tourism. They have a duty of
protecting social and artistic heritage and other businesses for creating by providing new ideas or
innovations. It would help in economic growth and also aids in maintaining dignity of those
places. Tourism Department is encouraging masses to get active or engage in sustainability of
heritage spots. Functioning of media is extremely vital as it draws attention of people via the
means of mass communication such as televisions, newspapers, etc.
Capital projects :
It is related with the large sum of investments that is needed to add so that modification in
project can be done. It is based on the usage of assets in both terms commercial as well as work
forces for finishing a task. It includes acquiring of resources or property lease or lands, or in the
purchasing of new equipments. For promoting travel and tourism sector, capital projects is
considered as more precious. There are many capital budgets that is related to this sector:
Cross railway projects are assisting towards economic evolution of wide regions by
contributing tourism in the rural regions. By the development of transportation there occurs big
modification that can be highlighted in facilitating and accessibility of summer rides via
historical trains at border spheres.
Tourism Information centre is one of the favourable position or location in United Kingdom
where people can visit for acquiring knowledge related to best services.
Heritage understanding is all about those information that is communicated to its visitant
as learning and nationalist park like museums. It involves beginning, nature and function of
historical objectives on the basis of personal and non personal methods.
There are two sources by which finance can be done in sector of tourism :
External source :
Public finance : It is associated with the duty of government regarding to the economy. It is a
division of economy that assess the sale of legal bodies and expenditure as well. It covers
following elements :
 Venture capitals : It is that capital which is invested in the original or first stage after
examining a firm.
 Debenture : Debt is declared to be most economic way of finance in relation to equity as
they usually not share any control with capitalist .
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 Equity share : It is most ordinary kind of finance for larger organisation.
Internal source or Non public finance are:
 Owner's investment : It is nothing but the capital that is being invested at the beginning
of business. It is used to bought by possessor only.
 Retained profit : It refers to the reserve that is apart from profit and is utilised by the
venture for the upcoming operations.
 Debt Collection : It is related to the aggregation of currency that is owned by debit-ors,
which is being operated for payments or percentage of total sum of capitals.
CONCLUSION
From the above based report, it can be concluded that finance and fund is an important
factor for each and every organisation in order to manage or control all the operational actions in
effectual way. This project report is made on the basis on two different firms that are Carnival
plc London, England or Dalata Hotel Group. This report has been included value of cost and
volume in context to enterprise of travel and tourism, different pricing methodologies and its
effect in market place and consumers. There are several extrinsic factors such as social, political,
economical factors, etc. that may easily influence on the organisation like hospitality industry as
well as travel and tourism. In addition to this, it also describes the significance of various
financial accounts of firm's activities.
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REFERENCES
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Online
Devra Gartenstein. Why Is Financial Management So Important in Business? 2017. [Online].
Available through :<http://yourbusiness.azcentral.com/financial-management-
important-business-4406.html>.
6 Different Pricing Strategies: Which Is Right for Your Business? 2017. [Online]. Available
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APPENDIX
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