Analyzing Financial Performance & Funding in Travel and Tourism

This report provides a comprehensive analysis of finance and funding within the travel and tourism industry. It examines the importance of cost, volume, and profit for management decision-making, using Carnival Corporation & plc as a case study to explain cost management and pricing methods. The report also assesses the use of management accounting information as a decision-making tool, focusing on Dalata Hotel Group plc. Furthermore, it interprets the financial accounts of Dalata Hotel Group plc for the year ended 31st December 2016, highlighting key performance indicators over two years. Finally, the report analyzes sources and distribution of funding for tourism development, covering capital projects associated with the industry.

Finance and Funding in Travel and Tourism
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Contents
Introduction....................................................................................................................................3
Task 1..............................................................................................................................................4
LO1- Understand the importance of costs, volume and profit for management decision
making in travel and tourism.......................................................................................................4
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study...........................4
P1.2 analyze pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc................6
P1.3 analyze factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study..............................................................7
Task 2..............................................................................................................................................8
LO2- Understand the use of management accounting information as a decision-making tool
in travel and tourism businesses...................................................................................................8
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............8
P2.2 Assess the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc..............................................................................................................8
Task 3............................................................................................................................................10
LO3 Be able to interpret financial accounts to assist decision making in travel and tourism
businesses......................................................................................................................................10
3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2016 showing at least two years performance.....................................................10
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Task 4............................................................................................................................................15
LO4 Understand sources and distribution of funding for public and non-public tourism
development..................................................................................................................................15
4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism...........................................................................................................15
Conclusion....................................................................................................................................17
References.....................................................................................................................................18
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Introduction
This is being introduced from the report that for the travel and tourism business it is very
necessary that pricing must be corrected so the customers cannot go for the competitors and try
to meet the expenses of the company. In travel and tourism business the strategy of pricing
method must be made according to the business and its competitors. This report also denotes the
increase of capital, investments and their budgets and also signifies their support to the
management. Managing accounts along with financial & income statements of the hotel Dalata
hotel group is must and needs to be taken care while preparing them.
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Task 1
LO1- Understand the importance of costs, volume, and profit for management decision
making in travel and tourism
Carnival Corporation, the American based world largest company in the field of travel leisure. It
has over 100 ships under ten cruise liner brands. Carnival employees over 120 thousand workers,
it handle over 11.5 million customers in a year (Rahimi and Kozak, 2017). The company
currently handling 25 ships and the largest ship can handle almost four thousand passengers.
P1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.
Carnival Corporation have to manage the cost and volume for the finance and funding the
various cost which could be involve in travel and tourism sector for financial management are
 Operating cost: operating cost are the costs which involve in various operations and
providing services of any business. The operation cost consist of two fragment
Fixed cost: fixed cost is the cost whose value do not change when the volume of the
production and services changes. In travel and tourism sector fixed cost could be
insurance, rent, equipment etc. (Timothy, 2017).
Variable costs: It contains the costs whose value changes with change in the amount of
production and services. The various examples of variable costs are wages of worker,
electricity and gas consumption in serving the customers, marketing cost, cost on
maintenance.
 Direct costs: the cost which are directly involve in manufacturing, production, providing
services etc.it include various cost like cost came in paying salary to the worker, cost
came in buying material and tool, for hiring labors, for consultant.
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 Indirect costs: Indirect costs are the cost which do not directly contribute in the cost but
can contribute in the cost of the product and services. It includes cost of transportation,
office cost, distribution cost, selling cost, security cost, administration cost.
 Allocation and apportionment cost: In this type of costing technique the cost of
expenditure of service is shared among various streams that were funding it.
Volume of any production or service refers to the number of customer to be cover to fulfill the
goal of the firms. It consist of various analysis which decide the cost of product like (Rahimi and
Kozak, 2017):
 Break-even analysis: The break-even analysis shows the profit margin of the firm. It
tells what number of total volume of services and products to be sale to acquire a profit
margin over the total cost spend in providing services and products (Timothy, 2017). The
price of the product is decided on the basis of break-even analysis,
 Economies of sales: It means that the cost of product is depend on amount of production,
if the production rate is high then the cost of the product will going to decrease.
 Diseconomies of sales: If the firm is growing at the rapid rate then it will also affect the
cost of the product.
Importance of volume and cost for Carnival Corporation for financial management in travel and
tourism (Veretekhina, et. al., 2017).
 To decide cost of services and product: there were several factors in cost and volume
analysis which will decide the final cost of product and services.
 For decision making: the company makes it decision by analyzing the data of the cost-
volume analysis
 For making budget: cost-volume analysis is helpful for making the budget of the firm
 To increase profit: The data of cost-volume help in making efficient decision which
increases the profit of the firm.
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 For the expansion of the firm: The demand of the customer and the production rate
decides whether the firm requires expansion in its industry (Mahrous and Hassan, 2017).
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P1.2 analyze pricing methods used in the travel and tourism sector. You should use
relevant examples from different cruise brands of Carnival Corporation & plc.
This method is used by various corporations to decide the price of the product. The various
technique uses in pricing methods are:
 Market-based pricing: In this method price of the services and products are decided on
the basis of market demand. If demand rises then product price also rise.
 Cost-based pricing: In this method, the price of services and products are decided by
considering actual cost of that product and service.
 Cost-plus pricing: In this method, the price of services and products are decided by
adding all the cost involve in manufacturing of that product and services.
 Competition based pricing: In this method, the company changes its pricing strategy
according to the pricing strategy of its competitor in the market for the same product to
attract customer.
 Contribution pricing: In this method, the price of services and products are decided by
analyzing how much contribution does each product give to cover up the fixed cost of
production
 Top-down pricing: In this method price of services and product is decided by analyzing
the budget of the customer.
 Return on investment: In this method, the price of services and product is decided by
analyzing the rate of production, selling rate, and the profit obtain from each product.
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P1.3 Analyze factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study.
All companies in the market could only survive in competitive market if it is able to maintain its
profit margin. There were many factors which influence the profit of travel and tourism
industries, these factors are (Veretekhina, et. al., 2017):
 Seasonal variation: Various customers who were approaching the travel and tour
company are in favor of any particular environmental condition. So the customer appeal
changes for different environmental condition of the tourist destination at any particular
time. This appeal leads to variation of arrival of tourist in the calendar year.
 Political environment: The terrorism around the world is highly influencing the tourist
appeal as the customer always want to check security related issue before allocating the
holiday destination. The political relationship between two nations always decides the
amount of tourism in both nations due to each other (JOVANOVIĆ & ILIĆ, 2016).
 Economic environment: The tourist also attract from the economic growth of the
country. The number of tourist arrival in developed nation is more than that of
developing nation.
 Social environment: There were several countries which possess a friendly environment
for any tourist. This social environment attracts many tourists.
 Current trend: Various state capitals are planning various capital projects to attract
tourist. This project decides the trends in the tourism sector as tourist want to visit these
newly develop capital projects (Veretekhina, et. al., 2017).
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Task 2
LO2- Understand the use of management accounting information as a decision-making tool
in travel and tourism businesses
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.
P2.2 Assess the use of management accounting information as a decision-making tool for
Dalata Hotel Group plc.
Slide Note: This is being explained with the help of poster about the meaning of Management
Accounting System in the organization Dalata Hotel Group Ltd. The Management Accounting
System is a method which helps in collection of data used to analyze financial data. This data is
being collected by various methods (Nowduri, 2014). These methods are primary and secondary
data. The data is being collected by various methods such as budget report, financial statement,
job cost analyses and variable analyses. Management Accounting System is a method which is
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more used at the time of launching a new product and services in the market. As various steps
are being taken such as planning, collection of data, implanting the plans and analyzing the
results etc. growth of the organization is also being compared according to the last year
performance so that new strategies can be made and fresh data can be used in making strategies.
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Task 3
LO3 Be able to interpret financial accounts to assist decision making in travel and tourism
businesses
3.1 Interpret financial accounts of Dalata Hotel Group plc for the year ended 31st
December 2016 showing at least two years performance.
Every firm manage its financial data. These data were tally by the higher official to decide the
working efficiency of the firm; these data give the brief about the financial performance of the
firm. These data came under the category of financial data. Various methods to estimate the
financial account are:
 Cash flow statement: It indicates inflow and outflow of the cash in the tourism business. It
is helpful in determining where the majority of fund is spending in the firm or from what are
the major sources of income of the firm (JOVANOVIĆ & ILIĆ, 2016). This help to check on
various process involving the cash flow. The ratios are used for the measurement of the profit
and loss of the business in the above analysis in 2016 the margin ratio is increased by 75%
from 2015 in 2016 cash ratio is 1 and in 2016 it is 3 so it shows the good performance of the
Dalata hotel group.
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