UK College - Travel & Tourism: Finance and Funding Report Analysis

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, focusing on the financial management of businesses like Carnival Corporation plc. It explores crucial aspects such as cost, volume, and profit (CVP) analysis, along with various pricing methods including competitive, penetration, and cost-plus pricing. The report also examines factors influencing profitability, such as seasonal variations, changing trends, and bad debt. Furthermore, it delves into the application of management accounting information, including forecasting, budgeting, and variance analysis, as tools for effective decision-making within the Dalata Hotel Groups. The analysis highlights the importance of these tools for operational, strategic, and business planning, and their impact on a company's ability to maintain operations.

Finance and funding
in
Travel and Tourism sector

INTRODUCTION
The tour and travel sector is very important for the growth of a country's economy.
With the change in trends the customers are becoming very choosy for the packages as
prefer the packages which will satisfy all their preferences in a fair price. There are many
companies in tour and travelling sector. So the financing and funding of this sector is also
very important part of the sector. This report presents different type of financing and
funding methods for the Carnival& corporation plc which are involved in high luxurious
cruises. This report is based on the different financial management by the company. The
report also presents different type of management accounting information and how it is
useful in decision making. The report interpret financial accounts of Dalata Hotel Groups
showing its annual performance. The report also presents the sources of funding for
different capital projects in te tour and travelling sector.
TASK 1
1.1 The importance of financial management of travel and tourism business.
The management of the funds in an effective way to accomplish the organizations
goals and objectives is financial management. It plays a vital role in organising the financial
activities in tour and tourism business. It helps in estimating capital requirement and the
choice of sources of funding, management of funds, disposal of surplus and financial
control of the carnival corporation's activities. Financial manager's key tools or techniques
to control the financial activities in the business is CVP analysis. It explains the behaviour
of profit in response to a change in cost and volume. This analysis indicates the planning
process which management is using for predicting volume of future of any cost which has
been incurred, and margin which is earned and sales performances (Luzecka, 2016). The
three elements of CVP in financial decision making of carnival corporation & plc are
follows:
 Cost: the cost of the company can be determined by the profit which company
earned in a specific time period. The funds required for the production of a product can be
cost of the production. The cost of a company is classifieds as:
Direct cost: the expenses which incurred for the production of the product is direct cost.
Labour, machinery, raw materials can be includes in cost objects. The majority of direct

cost are variable like direct material, direct labour, direct expenses. These cost are called
prime cost.
Indirect cost: the costs which are hard to trace in relation to a certain cost object are indirect
cost (Tolkach and King, 2015). The cost which are required for the operational activities in
the company are called indirect cost.
Fixed costs: the cost which stay fixed when changes occurs to the volume of activity. They
can only change according to the rise or fall in inflation rate. Fixed cost in carnival &
corporation is the salary of the staffs, the maintenance of the room and ships etc.
Variable cost: these costs will vary with the level of activities like if carnivals sells more
cruises they will need to put on additional vessels, increase the staff and the cost of
additional fuel. Volume: The type and behaviour of cost will directly affect the the volume of
activities in business. Product price will be based on the cost of production, however there
is not a specific price level as the fixed cost needs to be covered regardless of the number
of tourist . The number of units produce and sell by carnivals will determines the price to
break even. Economies of scale are achieved when the carnival & corporation will increase
in the sales to increase the savings of the company to extends the business.
 Profit: high volume of sales and low cost will contributes in generating more profit
for the company (Vana and Malaescu, 2016). Break even analysis will helps in the
volume of the sells of packages and the cost of per package that will provide the
profit to Carnival & corporation
1.2 Different pricing methods for Carnival & corporation plc.
Pricing strategy is very important for the profit maximization of any organization.
Carnival & Corporation plc in order the enhance the profit and covers all the cost and
expenses incurred, should adopt the following pricing and funding methods: Competitive or marketing pricing: Now a days, with the increasing in the tourism
sector the tourist are becoming more choosy for the travel packages. Tourists are
preferring the packages with the attractive offers and discounts. The tourist compares all
the packages offers by different company with their preferences such as price, choice of

destination, place of accommodation etc. On the basis of the price and package offered by
the competitive company, the carnivals &corporation can fixed the price of its package
offering all the preferences of the tourists,to attract and make a client base. Penetration pricing: In this method the carnivals &corporation can set lower price
of its packages initially to attract the new customers and build their their loyalty for
the company. Penetration pricing is more appropriate when the demand for new
package is high and can be copied by the competitors easily (Singh, 2017). Low
price will discourage the entry of rivals in the business. Penetration pricing helps in
creating goodwill of the company if customers perceive that they are getting high
quality packages at a fair price.
 Cost plus pricing: In this method the company first determine the cost by adding all
the direct and indirect cost to ascertain what it cost the company to offer a package. A
markup percentage is than added to the cost which will determine the selling price. That
markup percentage is the profit per package. Cost plus pricing is useful when the cost of a
trip is not determined in advance.
1.3 The factors affecting profit for travel and tourism businesses.
In tour and travelling factors there are numerous factors which closely affect the
profit margin of business like Carnivals&corporation such as: Seasonal Variation: Tourists are prefer to go on holidays or to the destination at a
specific time when whether of the place is pleasant. Seasonal variations affects the
number of tourist and hence will affect the profitability of the business. During non-
peak season the company has to offer the lower rate by giving discounts or by
including more facilities in the package (Rahmani, 2017). It will affect the profit
margin per package. Changing trends and preferences: With the changes in trends the preferences of the
customer in travelling is also changing. The choice of country to visit, with the change in
trends like the choice for religious place, beaches, adventurous places or like destination
wedding etc. the carnivals&corporation should make proper market research about the
changing tend and customer preferences, as non-compliance of the trends will affect the
decision of the customer which leads to affect the profit of the company.

 Bad debt: For selling of the packages the carnival offers the packages to other travel
institutions like travel agents, online sites for increasing sales. Hence, default made by the
debtor in repayment affects the profitability of the organisation.
 Lack of effective planning & staff: Proper strategic management and planning is
the main key for the organisational growth and success. In case of ineffective
planning of utilization of financial resources the profit margin will be affected.
Likewise the skills and ability of the person are very important in the organization
(Tung and King, 2016). If the staffs are incapable or fails to satisfy the needs or
problem of customer, it will affect the goodwill of the company and the growth of
the company.
TASK 2
2.1 Different types of management accounting information
in travel and tourism businesses.
The accounting information gives the financial data of company to the managers whivh
are used for the decision making about the present future activities of the organization.
There are various accounting tools which can be used for travel and tourism business of
Dalata hotel groups such as: Forecasting: in order to stay competitive in the market every businesses must
conduct a strategic planning. The future performance of the business is planned with
the help of forecast planning. It helps in the planning of the business activities to
achieve the future goals and objectives by the detailed studies of the past
performance. Budgeting: It is a tool used by the management for the control of the cost of the
production. With the help of the forecast report, the future costs and liabilities are
made. Budget is used to determine the expenses of the business activities for
different department and set a budget so that the expenses can not exceed the
budgeted limits.(Chiu and Yeh, 2017). It helps to control the funds of the company
and the revenue from the sells.

 Variance analysis: this analysis compares the forecasted report with the actual
expenses or the budgeted cost of the company. The variation should be corrected, if
correction is necessary. The present performance of the company is being compared
to the past performances and the expected performance of the company.
(Dimitropoulos, Vrondou and Avgerinou, 2018). the shows the funds inputs in the
operational function of the company for the production of the goods and services.
This information can help the Dalata hotels for the proper financial planning of the
company.
 Financial statement analysis: Business unit can take the ratio analysis more
effectually with the help of different financial statement analysis. The financial
statements helps to show the company financial performance for a specific time
period say monthly or annual basis. The ratio analysis helps managers of Data hotels
to control whether the business entity is operating according to the goals set by the
budgeted tools to increase the profit margin and financial performances.
2.2 Assessing the use of management accounting information as a decision-making tool
The accounting information mentioned above is very important tool for making
effective decisions for the Dalata hotel groups. The uses of the accounting information are
follows: Business decision: the accounting information provides an executive team for
different decision for each department of the organizations. The tools and
techniques helps in the decision making of business. The variance analysis helps to
compare the past and expected performance of the company, the outcomes from the
analysis will help in making decisions for the forecast and biudget planning of the
company. (Platzer, 2014). The analysis tools is important for the company's budget
control. It will help the Dalata hotels group in making efficient decision regarding
the the strategic planning. Operational Planning: budgeting helps in assisting the allocation of financial
resources for each department in the organization. It helps in making the
operational planning for the company. It helps in controlling the financial activities
in each department. Budgeting is important to compare the actual costing with the

budgeted cost and helps to make proper planning and forecasting past performance,
the revenue and cost for making effective planning for the operational activities of
business.
 Strategic Planning: budgeting techniques helps in making the strategic planning of
the company, it helps in estimating the future performance, revenue and expenses in
an attempt to make the future planning and outcomes. It helps to assist weather new
operations are up to the mark as expected. The strategic planning is very important
for the managerial and operational function and in starting or expending new
projects. The planning is done by estimating the past trends and performances for
making new strategic planning for the new projects. Going Concern: Financial statements helps in analysing the company's
performances in a specific time period. The financial statement analysis helps in
making management planning as it gives information not just about financial
position, but also provides information like liquidity and solvency capability which
helps to provide the company's capability of paying its short term and long term
debts. The financial ratio helps to provides information to public wheather the
company is capable of maintaining its operations into future also.(Ly, 2018).
 Cost management: it uses the cost accounting techniques which helps in to
maintain the allocation of cost for the process in production of product. The true
unit of cost per product. It ascertain by the cost accounting process and helps in
making decisions regarding the allocation and estimation of cost.

TASK 3
3.1 Presenting analysis of financial statements with context of Dalata Hotel group Plc of
past consecutive two years

The above table is indicating financial performance with context of analysing its
different ratio, as all are compared with standards of industry average. By considering iuts
profitability gross margin has been stated as in year 2016 it was observed as 62.20% which
got increment of 1% because of attaining better capacity of earning in ease format. In the
same series, there was also increment in net profit ratio from 2016 to 2017 to 12.02% and
19.60% respectively. As it had been justified that it had gained margin in huge aspect. It
could be justified from net margin that Dalata Hotel had proper control on its expense in
context of its operation which is raising in efficient manner. Its profitability had been also
measured through Return on Capital Employed and equity. As in year 2016 it was indicated
as 4.53% and in its following year it was 7.56 so it had generated sales with perspective of
investment in the best possibilities (Agag and El-Masry, 2017). With reference to return on
equity which is directly indicating that investment through shareholders had been optimised
in such a way which is represented in its increased level of sale as 6.03% to 10.06%.
Its liquidity had been measured through current and quick ratio, in context of current
ratio it is not capable to repay its liabilities and from observing it from 2016 to 2017 it is
decreasing which represent that it has low current ratio. By observing quick ratio, from year
2016 to 2017 it got decreases from 42.04 to 41.53 as it is reflected that it does not have
capability to repay its debt in short term with its quick assets. While observing its level of
solvency, receivable turnover is decreasing from 42.04 to 41.53 in year 2016 to 2017
respectively which reflects duration for collecting creditors amount. Its inventory turnover
is increasing which reflects inability for implying inventory in efficient aspect. The last
indicator of solvency represented as creditor payment which is decreasing from 42.33 to
38.98 so its solvency position is in efficient aspect.

By observing its position of gearing and debt to asset it could be justified that
organization is highly relied upon equity as compared to debt whose gearing is in year 2016
as 0.46 to 0.33 in 2017. By observing debt to total asset which is reducing from 0.25 to 0.22
as it is reflecting full performance which is directly enhancing its gearing.
TASK 4
4.1 The sources and distribution of funding for the development of capital projects
.
Enclosed in leaflet.
CONCLUSION
By summing the report, it can be said that the financial management tool is highly
significant which in turn helps to make effectual financial decisions. With the help of this
report,by analysing different pricing method the suitable method can be used by the carnival
& corporation plc . It can be seen in the report that change in whether condition, customer
preferences and changing in market trends can affect the profitability of tour and travels
business. Along with this it can be arbitrated that forecasting , budgeting and variance
analysis is an important control tools of accounting information for travel and tourism
companies by evaluating the financial statements of the company. By analysis of different
financial statements of the Dalata hotel groups, the financial performance of the past few
years is determine in the report. The report also depicted the different sources of funding for
the capital projects of the tourism sector like hotel expansion, development of small
heritage sites.