Finance & Funding in Travel and Tourism: Corporation Analysis Report

This report delves into the financial aspects of the travel and tourism sector, focusing on cost and volume analysis, pricing methods, and profit determinants. Using Carnival Corporation & plc as a primary example, the report evaluates the importance of cost management and explores various pricing strategies, including market-led, cost-plus, and return on investment approaches. It examines the factors influencing profit, both internal (e.g., bed debts, competitors) and external (e.g., seasonal variations, political and economic environments). The report also analyzes financial accounts, including interpretation of ratios like quick ratio and current ratio, offering insights into the financial health of companies like Dalata Hotel Group plc. Overall, the report provides a comprehensive overview of financial management in the travel and tourism industry, including how companies can navigate challenges and leverage opportunities to achieve sustainable growth.

FINANCE & FUNDING
IN TRAVEL AND
TOURISM

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
1.1 Evaluating the importance of costs and volume in financial management of travel and
tourism businesses by using Carnival corporation plc...........................................................1
1.2 Explain pricing methods used by Carnival corporation plc in the travel and tourism sector
................................................................................................................................................2
1.3 Explain factors determinant profit for travel and tourism businesses..............................3
TASK 2 ..........................................................................................................................................5
2.1 and 2.2 covered in PPT.....................................................................................................5
TASK3.............................................................................................................................................6
3.1 Interpreted travel and tourism financial accounts ...........................................................6
............................................................................................................................................7
TASK4...........................................................................................................................................10
4.1 Covert in leaflet .............................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Finance and funding in travel tourism sector are motivate to people for gain information
and knowledge related to financial aspects and condition of economy as well as company
financial performance. Through this firm has make investment plan related develop and
expansion of business activities. In this report Carnival Corporation & plc are use, its a US based
cruise company and they has world largest travel leisure with over 100 vessels across 10 cruise
line brand. Carnival Corporation & plc has effectively use strategies for analysis cost and volume
in financial management. Dalata Hotel group plc has Ireland based firm and they has largest
hotel operator with 38 three and four star hotels. They run their business operation across Ireland
and the UK. This report cover importance of cost and volume management in the field of
travelling sector (John and Susan, 2015). Analysis pricing method with several options and
influencing profit for travel and tourism businesses. Analysis distribution method of funds in
public and private sector tourism development.
TASK1
1.1 Evaluating the importance of costs and volume in financial management of travel and
tourism businesses by using Carnival corporation plc
Company has produce product and services for satisfy consumer needs and wants for this
they have spend lot of money. Term cost are explain as sun total of several expenditure incurred
in running businesses activities. Businesses wants to maintain their cost and expenditure so that
they has effectively operating business activities. Cost has mostly two types one is fixed and
second is variable which incurred for implementation of business activities. Some other types of
cost are direct cost, indirect cost, allocation cost and other overheads. Carnival corporation plc
has provide services to their clients and accrue expenditure or cost for providing these services.
Firm has use several types of tools and techniques for operating their businesses and take
effective decision regarding company activities. Some important techniques for analysis
businesses financial activities are break even point, economic of scale and cost volume analysis.
Carnival corporation plc has use cost volume profit analysis, through this they have analysis cost
of the running businesses and investigating actual profits drown form all services provided to
their customers (Koutra and Edwards, 2012). This technique are help Carnival corporation plc
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for taking decision related to business cost and accordingly manage their sales volume to gain
appropriate amount of profits. Cost volume analysis are effective tool for analysis current actual
cost those provide help to know capacity of Carnival corporation plc for providing better services
to their customers. Their are various benefits for using cost volume analysis tool or technique
those are: better controlling, effective decision making process, forecasting budgets and fixing
product or services pricing. Company has always consider peak seasons before taking any
strategies decision. In this season lot of people are go outside their home cities for spend quality
time and that time firm have generating lot of revenue form providing best quality of services to
their clients. So that company has effectively use these analysis and tools or techniques for gain
profitability in long period of time and enhance sustainable growth in their industries. Cost are
directly effected to businesses activities, lack of financial resources has decrease productivity
and profitability. For any business three main component are cost, business volume and profit
margin. They has focus on these component for gain high market share and long run
sustainability and expend their business operation at international level (Ma and Hassink, 2014).
1.2 Explain pricing methods used by Carnival corporation plc in the travel and tourism sector
In today's environment firm has face lot of competition in travel and tourism sector in
UK. Carnival corporation plc has make strategies and plan for different tour packages to attract
large number of consumers. They has use attractive pricing policies or method to increase
number of clients. Some important pricing methods are as follows:
Market – led pricing method: In this method firm has compare their tour package
pricing with other competitors offers. Through this they have analysis competitors pricing
strategies and fix accordingly their own price. For attracting large number of people to led
market company has make effective pricing policies. Low pricing polices are very best strategy
for gain high market share. Carnival corporation plc management has analysis pricing of
facilities and services provided by competitor and set their own price as per comparative study
between their tour package offers and others competitors tour package offers.
Cost – plus pricing: In this pricing method firm has calculating direct and indirect cost
of services and add some certain percentage of profit margin into them. Many firm has use this
pricing strategies for always fix certain amount of profits. For this firstly company has analysis
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break even point and increase their package price from this point, so that firm has earn sufficient
amount of profits on their investments in business activities or operations (Morrison, 2013).
Return on investment: Every company wants high return on their investment. So that
they have fix their return policies on investment and make pricing of tour packages accordingly.
Company has use ROI method of gain idea of their profits. Price are fix on the bases of interest
rates and rate of return on their investment. Return on investment are very important form
company to gain long term profitability and sustainability (Spenceley, 2012). Through this
method company has gain competitive advantages at market place. Very people are wants return
on their investment for this they have make appropriate strategies and plan. An organisation has
forecasting some return on their investment. In tour and travelling industries investor has
analysis economical factor before invest their money.
Marginal cost pricing method: Many company has use marginal costing method for fix
their tour package price. Under this method price are charge according to their extra services
compare to standard services. One additional services or extra expenses involve in organising
tour has correspondingly increase some amount in their tour package prices. This method has
adopt by less number of firms because its too complicated to determine actual additional price
and the same time over all cost are go very high compare to their competitors price of tour
packages (Murphy, 2013).
Carnival corporation plc has adopt market led pricing method for deciding price of tour
packages. But before taking decision on pricing method firm has consider some pricing
influencing factors those are seasonal variations, social environment, political stability, economic
condition etc. Carnival corporation plc has analysis their environment factors then they have
select appreciate pricing strategies for developing their productivity and business operations.
Environment factor has two types one is internal factor and second is external factor. They have
also consider their long and short term liabilities.
1.3 Explain factors determinant profit for travel and tourism businesses
Profit: Profit mean financial gain form running business operations. That is the focal
point in any organisation. Several factor are influencing profit margin of an organisation.
Carnival corporation plc profit has effected by internal and external factor of an organisation.
Some important internal and external factor are as follows:
Internal factor:
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Bed Debts: Bed debts arise when customers are not paying their service bills which are
receive by company. Some time customers are not paying their bills on time so that this loss are
convert into bed debts for the firm. Firm has recover this bed debts form their profits and resulted
over all profit margin of an organisation are decrease on a same proportions. Bed debts recover
form profits and loss account of an organisation (Nielsen and Spenceley, 2011).
Competitors: Firm has analysing competitors pricing policy and after then they make
their own price of tour package. In tour and travel industries many firms are provide same kind
of services so that its very important for company to differentiate their product with their
competitor product. For this company has appreciate innovating environment with in an
organisation so that employee's are provide new ideas for running businesses and new attractive
offers for gain high market share.
External factor:
Seasonal variation: Tour and travel industries are depend on season. So that when
season are change total profitability of the company has also change. On peak season firm has
make different strategies for attracting large number of customers. Due to season variations
company profitability are effected. Consumers has choose hotel and tour agency accordingly to
their needs and wants. UK government has provide help to tour and travel agencies for running
their businesses effectively on peak and non peak season.
Political environment: Government has make legal rule and regulation of tour and travel
industries so that over all profitability are effected. Political environment has include government
taxation policies, foreign trade regulation, legal act., investment law etc. Government stability
are also one of the key problem because due to change in system some rule and regulation are
effected. So that those create negative impact on firm operations and over all productivity &
profitability. Company has analysing their political environment before taking any change or
new product offers at market place. When tourist plan their holidays they considers rule and
regulation given by government. Political environment has directly influencing firm profit
margin (Pike, 2012).
Economic environment: Due to change in economy company has face many problem
related to interest rate, change in exchange rate, income level of customers, growth rate of tour
and travel industries etc. These all factors are directly effected to profitability and sustainability
of the firm. So that company has firstly consider these all economical factor and then take
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effective decision on pricing policies. Government has provide subsidies, investments,
employment opportunities and so on for maintain economical environment of the country.
Social and culture environment: Social and culture environment are differ form area to
area so that accordingly firm has make pricing strategies. Its include demographic population,
social mobility, people lifestyle, attitude of the consumer’s and level of education etc. Company
has consider these all factor before taking any decision regarding to pricing policies of tour
package.
Technology: In today's environment technology are rapidly change. Its very important
for the company to manage this change in a very effective manner. Technology has provide
competitive advantage to firm for selling their product and services at market place. Through this
organisation has increase their profitability by attracting large number of consumers. Carnival
corporation plc has use technology for providing quality of services to their clients. With this
they have provide full satisfaction to their customer’s (Song and Lin, 2011).
TASK 2
2.1 and 2.2 covered in PPT
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TASK3
3.1 Interpreted travel and tourism financial accounts
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Here are some calculation related to income statements, cash flow and balance sheets:
Interpretation of ratio:
Quick ratio: Purpose of ratio are calculating liquidity of the firm for paying short term
liabilities. Quick ratio of Dalata Hotel group plc has increase form 0.23 to 0.32. that is show firm
has fully meet with their financial needs.
Quick ratio = (current assets – inventories) / current liabilities
For the year 2015= 31.61/136.4 = 0.23
For the year 2016 = 44.18/139.91 = 0.32
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Current ratio: This ratio showing firm capabilities to full fill long and term liabilities. Ideal
current ratio is 2:1. Current ratio of Dalata Hotel group plc has increase form 0.28 to 0.36.
Current Ratio = Current Assets ÷ Current Liabilities
For the year 2015 = 38.01/136.4 = 0.28
For the year 2016= 49.81/139.9= 0.36
Capital employed ratio: This ratio has include equity capital and long term debt funds. Capital
employed ratio has calculated by four ways: on the basis of gross profits, profit after tax, profit
before tax, operating profit.
For the year 2015 = 99.60/307.21*100 = 32.44%
For the year 2016 = 286.89/256.52*100 = 111.84%
Net ratio profits: This is a profitability ratio that create relationship between net profit after tax
and net sales. Dalata hotel group plc has increase their profit form 14.24% to 40.75.
Net profit ratio= Net profit after tax / Net sales.
For the year 2015 = 68.89/483.778*100 = 14.24%
For the year 2016 = 39.52/96.98*100 = 40.75%
Gearing ratio: This ratio are interpreted financial risk of the company. This ratio show
proportion of borrowing capital and equity.
Particulars 2015 2016
Acid test ratio 0.23 0.32
Current ratio 0.28 0.36
Return on capital employed 32.44% 111.84%
Net profit Ratio 14.24% 40.75%
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