Analysis of Finance and Funding in the Travel & Tourism Sector

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, focusing on the importance of cost and volume in financial management, pricing methods, and factors influencing profitability. It examines various management accounting techniques, including budget reports and financial statements, using the Dalata Hotel Group Plc as a case study. The report interprets financial accounts to aid decision-making in travel businesses and analyzes funding sources and distribution for capital projects related to tourism. Carnival Corporation & Plc is used as an example for cost, volume, and profit analysis, discussing the impact of seasonal variations, social environment, and current trends on profitability. The study highlights the crucial role of management accounting in analyzing internal data and making informed financial decisions, ultimately aiming to enhance the profitability and sustainability of travel and tourism businesses.

FINANCE AND FUNDING IN
THE TRAVEL AND TOURISM
SECTOR

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P 1.1 The importance of costs and volume in financial management of travel and tourism
businesses....................................................................................................................................1
P 1.2 Analysis of pricing method used in the travel and tourism sector.....................................2
P 1.3 Analyse factors influencing profit for travel and tourism businesses................................3
TASK 2............................................................................................................................................5
P 2.1 Types of management accounting in travel and tourism business.....................................5
P 2.2 The use of management accounting information as a decision-making tool for Dalata
Hotel Group of Plc......................................................................................................................6
TASK 3............................................................................................................................................7
P 3.1 Interpret financial accounts to assist in decision making of tourism and travel business..7
TASK 4............................................................................................................................................8
P 4.1 Analyse sources and distribution of funding for the development of capital project
associated with tourism...............................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
In this investigation, we would take a look at the importance of management accounting
funding and budgeting of tourism and travel company and Carnival Corporation & plc company
as well. We will discuss about to the importance of costs and volume in financial management of
travel and tourism business in this company and analyse pricing method used in the travel and
tourism sector in the various cruise brands of this company as well. We would analyse the
factors influencing profit for travel and tourism businesses. Moreover, we take a look on
different kinds of management accounting information that could be used in travel and tourism
businesses using Dalata Hotel Group Plc and assess the use if management accounting
information as a decision-making tools for this hotel as well. Nevertheless, we would interpret
financial account of Dalata Hotel Group Plc for the year 31st December 2016 and shows its two
years performances. In the last stage of this investigation, we will analyse source and distribution
of funding for the development of capital projects associated with tourism.
TASK 1
P 1.1 The importance of costs and volume in financial management of travel and tourism
businesses
COSTS: Direct cost: Direct cost defines about to those cost which are directly related to that
prices which is influenced to the production of specific goods and services such as
administrative expenses, depreciation cost etc(Adora, 2010). Fixed cost: Fixed costs are those costs which would never change even increase and
decrease volume of production of goods and services. These are those cost which are paid
by the company. Variable cost: Variable cots are those cost which are fluctuating according to the
proportion with production output. It depends on the production volume of the company
whether it increase or decrease.
 Importance of costs and volume: This is the kind of analysis in which we have to find
out the break even point between cost and volume of the Carnival Corporation & Plc
business. For the aim of this ascertaining this, there are various tools and techniques are
available to find out the best solution. Moreover, several assumptions could be
implemented in terms for finding the cost and volume within the business. There are two
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types of cost fixed and variable which affect to tour and travels business, which are
variable cost are calculated on per unit and fixed cost remained constant. In Carnival
Corporation & Plc business, CVP analysis plays a crucial role in terms of better prepare
their financial plan and effectively control the financial affair of the firm.
In the company there are all the future plan and projects regarding to tour and travel program
must be proper prepared and cost analysis also made in order to make an appropriate decision so
that there would be no scope of generating any loss for the company(Witt, Brooke and Buckley,
2013). This is the most useful tools for the business to figure out break even point of the cost and
volume and make a profitable relation and this technique, ultimately, helps the organisation to
access to all essential information and data regarding to the cost reduction within the business
and this exercises would assist the company to achieve the way in which there profit will be
generated and no chances of loss. For gain positive result in the business, there must be figure
out the best combination among the all cost such as fixed and variable costs and apart from this,
cost, volume and sales financial data are analysed to find out to provide growth and productivity
for the Carnival Corporation & Plc business. This process are not so much difficult to the
financial experts of the company in order to assessment of the financial data and find out the best
cost reduction way in terms of gaining more profit for Carnival Corporation & Plc firm.
P 1.2 Analysis of pricing method used in the travel and tourism sector
For every business it is necessary to analyse their proper pricing method within the
business and for earn profit on the investment on the production and service factors. For
ascertain that element pricing of the product and services is a most essential part to gaining profit
for Carnival Corporation & Plc firm(Diekmann, and McCabe, 2011). There are several processes
which can use in business that are cost oriented pricing, market oriented pricing, transfer pricing,
going rate pricing and so on. Cost oriented pricing method: This pricing method describe about to some margins are
added to the cost price of the product are services of AIDA Cruise in Rostock firm and
this activity would help to derive their profit from business operation as well. This
pricing method are easy to apply on the business and simple to understand the methods as
well. Market oriented pricing method: This approach are concerned about to the pricing
method which is depended on recent competition in the market and according to market
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oriented pricing method, if the prices of travel and tourism sector are high in the market
then Costa Cruises in Genoa company also need to take high rate from their product and
services in the company according to their competitors prices(Goswami, Mattoo and
Sáez, 2012).
 Marginal costing method: In this method, increasing and decreasing in the total cost of
production to manufacturing one more unit for particular item in the business. It is
depended on that situation in which break even point are analysed. There is fixed cost are
already assessed in the business while providing services only direct cost are needed to
computed in Holland America line.
Carnival Corporation & Plc is planning for the tour in the North America in which their
cruise brand services also available at there. In which 80,000 would be charged by the company
for hotel and fight fare expenses and other expenses while traveling. Apart from this, 200 is
charged for the food expenses that are a variable cost in the business that are charged according
to the tourist volume in the tour(Fletcher, Fyall, Gilbert and Wanhill, 2017). Cost oriented
costing method is used in this project and this method would provide the best profit margin for
the company while charging their prices on all their services and this activity would give profit
margin for the business as this method is understandable for all the related parties in the
business. Moreover, market oriented pricing method also be sued in order and according to this
method Carnival Corporation & Plc can compare their prices with its leading competitors in the
market which provides the same services and helps to set up their all prices according to
predetermined profit within the business.
P 1.3 Analyse factors influencing profit for travel and tourism businesses Seasonal variation: Seasonal variation play a crucial role in travel and tourism business
like there are many locations in the world which are mostly explored on seasonal
variation like lost of the people prefer to visit on winter and rainy season so that most of
the travel provide their best tour offers in theses seasons(Dwyer, Forsyth and Dwyer,
2010). Like wise Carnival Corporation & Plc need to offer several attractive offers to
their customers at low prices so that it would increase the tourist volume in the business
and influence profitability of the company. Social environment: These factor also influence the profit of travel and tourism business
and Carnival Corporation & Plc business as well. Social environmental factors like in the
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UK many of the functions like wedding, marriage ceremony, social parties and function
are organised at various location so that they would prefer to select different location
according to their occasion and functions So that on that situation travel company provide
their best offer to their clients at effective rate that attract them to purchase your services.
These occasions can raise the volume of customers in the firm and influence their profit
of the company.
 Current Trends: There are many trends has borned today in the UK, who make the
people celebrate them on different-different times at various location. Current trends like
birthday party, ring ceremony, business party and meetings etc(Apostolopoulos, Y.,
Leontidou and Loukissas, P. eds., 2014). and these trends force them to celebrate it at
various places in the world. And people go for it by tour and travel companies packages
at various location so that these trends increase the customer quantity of tourism business
and result on it increase profitability of Carnival Corporation & Plc business.
 Advertising and promotional activity also play a crucial role in the profit generation of
the travel business so that a proper market planning must be formulated in the business in
terms of increasing tourist volume within the business in terms of increasing profitability.
 In tourism business traveling expenses is also an essential part that must be
predetermined in the planning of the travel project because there is very fewer chances in
which flight and other traveling mode process is high than set margin in the
business(Evans, Stonehouse and Campbell, 2012).
 Carnival Corporation & Plc trip evaluation: Hotel expenses and airplane fare cost amount
in the tour project is 80,000. This is the total cost whereas 180 euros each tourist is
charged for their food expenses while traveling. Moreover, there are 100 tourist so that
total variable cos would be (150*100) which is equal to 15,000 euro. And in this, total
cost is sum of fixed and variable cost which amount to 95,000. But the charging price of
the business per tourist is 900 euros so total money charged by them is 90,000 euros. That
concluded that business is bearing loss of 5000 euros. But business is willingness to earn
at least 15000 euros so it has to charge amount of 1100 form every tourist to gain this
much amount of profit in Carnival Corporation & Plc business.
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TASK 2
P 2.1 Types of management accounting in travel and tourism business
Management accounting assist the administration of the business to analysis and manage
all the collect internal data which is related to the fund of the firm and it could be exercised at
regular basis so that if any problem arises in the business towards financial issues in the company
then effective solution can be figured out with the assistance of management accounting(Scott,
2011). Different type of management accounting are as below: Budget report: It is prepared by the fund manager of Dalata Hotel Group of Plc and with
the help of management accounting process all the expenses will occur in the future must
be predetermined and documented in budget report of the travel and tourism business.
According to this management accounting it could be said that the company would
prepare a budget report before implementing a tour project and all the expenses are must
be included in this report effectively so that manager of Dalata Hotel Group of Plc would
be able to take estimation of future occurrence expenses in their hotels and prepare an
effective costing in favor of hotel profitability and tourist concern as well. Financial statements: There must be prepared all financial statements in appropriate
manner because it is the deviance of their all expenses and profit in the
business(Swarbrooke and Page, 2012). All the services are providing by Dalata Hotel
Group of Plc must be in written manner and also tally their all financial statements of
their expenditure in the business so that with the help of it they would be examine all
expenses in hotel and charge on each tourist according to statements. So that this
management accounting also play a crucial role in the tour and travel company and
Dalata Hotel Group of Plc firm as well. Variance analysis: Variance analysis is a quantitative technique which are used to find
out the variance between actual and predetermined cost of the all expenses in the
business. This management accounting approach is used for ascertain the cause and
degree of difference between the forecasting expenses and actual expenses and according
to them effectively manage the project(Airey and Chong, 2010). Being a trainee business
adviser, I would suggest Dalata Hotel Group of Plc firm to calculate variance such as
purchase price variance, labor rate variance, material yield variance to know about to
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price differences of various services provided by hotel and examine their profit
effectively within the business.
 Forecasting: Forecasting about to the future expectation sales in the business also
provides the idea about to the profit rage of the firm(Heung, Kucukusta and Song, 2011).
As a trainee business adviser, I would suggest hotel manager and administration to make
a forecasting of future sales of their services and make a set a target in which they can
achieve their targets in the future in terms of getting more profit within the firm.
Forecasting helps the business to predetermine their targets and prepare a proper
marketing and sales planning according to them so that company would be able to
accomplish their set goals and objectives efficiently.
P 2.2 The use of management accounting information as a decision-making tool for Dalata Hotel
Group of Plc
Every business invest in the capital of a company for the aim of earning profit and
effective result from their investments(McCabe, Minnaert and Diekmann, eds., 2011). There are
several techniques available and with the help of management accounting information several
decisions can make towards generating more profit to the company. Theses are following: Payback period: This is the approach which is used by the most of the business in terms
of better control over the cash flow rather than on profits. It predetermines the time
period in which Dalata Hotel Group of Plc business must gain more profit on their
investment. As a trainee business adviser, I would suggest hotel manager to invest in the
capital project of the business that will assist them to earn more cash flow within the
firm. Discounted cash flow: It is the Discount rate in which business would be able to gain
more profit in the future in present scenario of the firm. As a trainee business adviser I
would suggest hotel managers to develop an effective discount rate for their customers so
that would be able to attract towards the services of the organisation and generate more
profit to the firm(Murphy, 2013). Since last few years Dalata Hotel Group of Plc
management has made their wrong decision in management accounting so it is gaining
loss in the business so that hotel must need to give an effective discount rate on their
products and services to raise their sales in the business.
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 Accounting rate of return: This approach describe about to differences between the
amount which are invested in the business and profit which is firm is deserve to earn in
the future(Tribe, 2015). This is very simple approach to preform practically in the
business. So as a trainee business adviser I would suggest Dalata Hotel Group of Plc
administration to perform this task and set the estimation of the future growth of the firm
and compare to the investment which are invested in the business to gain more profit all
the funding mist be accounted in the books and it helps management to make an
appropriate decision towards the business profitability and production increment.
 Investment risk and sensitivity analysis: All the risk which are concerned about to the
investment in the business must be examined by the expertise of Dalata Hotel Group of
Plc and make a suggestion to improve the quality of product and services within the
business(Guttentag, 2015). Risk is the major part of each business and in the hotel
industry there are several risks are associated with it. Being a trainee business adviser I
would recommend Dalata Hotel Group of Plc's management to have an analysis of risk
factors within the firm to know about to the future outcomes of the business.
TASK 3
P 3.1 Interpret financial accounts to assist in decision making of tourism and travel business
Euros 2016 2015 Variance
Room revenue 37,866 28,931 8,935
Food and beverage revenue 13,440 10,412 3,028
Other revenue 4,176 2,813 1,363
Total revenue 55,883 16,068 5,815
EBITAR 21,883 16,068 5,815
Rent (8,274) (1,966) (1,308)
EBITAR 18,609 14,102 4,507
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EBITAR Margin 39.4% 38.1% 1.3%
From the above analysis in the table it could be said that there is much improvement in
the performance in Dalata Hotel Group of Plc's. There are so much influence in their the value of
their pasty year and the next year. In 2015 the room revenue of the hotel is 20,931 and just next
year 2016 its volume increase and raise the amount to 37,866 euros so that it can be said that
there are so much revenue generate by its room booking services over these two years and there
sales also has increase by next year. It helps the management of Dalata Hotel Group of Plc's to
make profitable decision towards the company so that the firm would be able to achieve more
growth in the next year(Morrison, 2013). There is a variance between these two years of 8,935
generated by room booking in the hotel. Moreover, food and beverage revenue amount in 2015 is
10,412 and next year it increases by 3,208 and reach to amount of 13,440 and which prove that
the management of Dalata Hotel Group of Plc's hotel had provided better services and proper
selling of their food and products services so that the revenue of food and beverages are
increased in better way. It makes the top management of Dalata Hotel Group of Plc'sto prepare a
better financial targets to develop their business effectively over and over.
TASK 4
P 4.1 Analyse sources and distribution of funding for the development of capital project
associated with tourism
There are several sources and distribution of funding for the development of capital
project for tour and travel companies in the UK. So for this purpose it is essential that would
helps to make an effective tourism company(Song and Lin, 2010). There are several sources of
funding that can enable in make sure an effective tourism company are as below: Loans: There are several companies in the UK provides the loan services to their clients
at various stage. These facilities are also using by the various tourism companies in the
UK who develop their business by investing the loan fund as a capital in the business and
try to make successful(Weaver, 2011). This is an external source of funding for the
business to distribute their business at various stage to appropriate development in the
tourism industry. Loan can be further classified into two categories which are short term
and long terms loan facilities according to the policies of the firm and rules and
regulation of the loan authorities. Short terms loan are those fund which are taken for the
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short period for business development and these is often taken by the small business and
many times' tourism companies also need to take short terms loan for development their
business and enhance their services and capital of the business. These are often taken as a
bank draft form and there interest rate are in average because it does not contain large
amount so that there are interest rate is very low according to the fund volume. On the
other hand, long term loan are often taken by the big firms and big tourism organisations
to raise their capital in the business and also distribute them at the various departments in
the firm for their sustainable development in the firm. These are often required by the
most of the big business in tourism sector for their appropriate development in several
sectors of the business.
 Retained earning: Every business earn profit in the company and make use of it for the
future growth and business enhancement so that most of the tourism business mostly use
of their profit part to reinvest in the business to business expansion and some amount are
used for retained in the business which could be demanded in the future emergency in the
business so that these types of funding distribution must be there in each business to
make a proper strategy in order to appropriate sustain in the market(Vanhove, 2011).
CONCLUSION
From the above research, er have concluded about to how management accounting helps
the funding and budgeting of tourism and travel companies and Carnival Corporation & plc as
well. It is concluded that the importance of costs and volume in financial management of travel
and tourism business using Carnival Corporation & Plc company. We have analysed the pricing
method used in the travel and tourism sector using different cruise brands of Carnival
Corporation and plc. We have concluded about to the different types of management accounting
information that could be used in travel and tourism business sung Dalata Hotel Group plc and
assessed the use of management accounting information as a decision-making tools for this hotel,
moreover, we have interpreted financial accounts of Dalata Hotel Group plc for the year ending
31 December 2016. Ultimately, this research concluded about to the sources and distribution of
funding for the development of capital projects associated with tourism.
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