Financial Management and Funding Strategies in Travel & Tourism

This report delves into the financial aspects of the travel and tourism sector, focusing on cost, volume, and pricing strategies. It analyzes the importance of costs and volume in financial management, exploring direct, indirect, fixed, and variable costs, alongside break-even and cost-volume-profit analyses within the context of Carnival Corporation. The report also examines various pricing methods such as competitive, cost-plus, cost-based, value-based, and promotional pricing, and their influence on profitability. Furthermore, it investigates factors affecting profit, including seasonal variations, political and social factors, and competition. The report then discusses management accounting information and investment appraisal techniques using the case of Fulham Shore plc and concludes with an interpretation of their financial accounts and sources of funding.

Finance and Funding in
Travel and Tourism
Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 (CARNIVAL CORPORATION & PLC)..........................................................................1
1.1 Importance of costs and volume in financial management of T&T......................................1
1.2: Analysing various pricing method that are being related with travel and tourism...............3
1.3 Factors that influence profit in travel and tourism businesses...............................................4
TASK 2............................................................................................................................................5
2.1 Different types of management accounting information.......................................................5
2.2 Use of investment appraisal techniques as decision making tools........................................6
TASK 3............................................................................................................................................7
3.1 Interpretation of financial accounts of The Fulham Shore plc..............................................7
TASK 4..........................................................................................................................................11
4.1 Covered in Leaflet................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Travel and tourism sector is consider to be one of the fastest growing sector, that help in
the growth of economy. In today's world funds are required by each and every company to run
their daily business activity. In general, funding is defined as act of money that is engaged by the
owner of business in order to buy share at a particular period of time. In travel and tourism,
financial resource is made on practice of hotels services, restaurants, food corner, pubs,
travelling agents, etc. In this report carnival corporation is selected which is one of the largest
travel leisure organisation in world (Travel and Tourism, 2016.). The second company in this
project is Fulham Shore Plc.
In this project importance of cost volume profit is addressed in the context of carnival
corporation. Report also determine the management accounting information in the context of
Fulham Shore Plc. The report shows the interpretation of financial account of Fulham Shore Plc
and sources of distribution of fund to company in order to run different project.
TASK 1 (CARNIVAL CORPORATION & PLC)
1.1 Importance of costs and volume in financial management of T&T
Carnival corporation Plc is one of the largest travel and tourism company across world. It
has been developed when carnival corporation and carnival plc is combine together and
established more than 100 vessel fleet across 10 cruise line brand. There are number of quality
services provided by company and visitor make them feel comfortable according to their
spending capacity. Recently the manager of carnival corporation Plc are focused to control cost,
increase volume of sales and maximise profit during an accounting year. Thus, travel and tourism
industry are working with several aspect linked through finance that are defined below:
Cost:
Cost is defined as the main part for growth of every company (Saha and Yap, 2014). As
tour and travel company involve cost in their tour packages of different clients. So manager of
Carnival Corporation Plc consider cost as it help them to organise various tours and giving
suitable packages to clients. There are different types of cost that are discussed below:
Direct cost: All those cost that are straight away connected with the impose by carnival
corporation plc on cruise line and other services provided by to customer.
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Indirect cost: Those cost that are connected with company in some manner while
delivering various services to their visitors. Some of these are maintained charges, repair charge
etc.
Fixed cost: All those cost that are fixed during the production of different goods and
delivery services with travel company are known as fixed cost. For example some fixed cost for
carnival corporation Plc are utility bills, cruise fees etc.
Variable Cost: These are consider to be the cost that keep on fluctuating with the
production of several good and services (Page, 2014). For example some variable cost for cruise
line are rent of premisses, ticket charges etc.
Importance of costs:
In present era, it is very important to control cost as it help in maximising profitability of
company and sustain long term growth. In tour and travel company cost support company owner
to make important decision in order to grow and develop. Main importance of costs are
Direct cost: This help in cost control and reduction on useless activity that further helpful
to increase profit for company.
Indirect cost: These cost are related to various operation performed in company so it
have multiple benefits and are not directly traceable to a specific contract.
Fixed cost: These cost do not change with the change in production unit as company do
not have to pay any additional cost on production of extra unit.
Variable cost: This cost help manager in making various important decision as it has
different impact on the financial planning of company.
Help in cost reduction: With Manager of Carnival Corporation & Plc are focused to
remove unwanted expenses on various services provided to customer this help them to maximise
profit for a particular period of time.
Support in decision making: To take important decision manager first gather, identify
important information. The make useful decision to increase quality of service so that visitor
needs are fulfilled. In context of carnival corporation Plc manager take useful decision in order to
satisfy customer and increase sales.
BEV
Sales 800000
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Fixed cost 120000
Contribution 600000
BEP 0.2
Sales Contribution BEP
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
BEP Analysis
Column H Column
H
Volume:
It is consider to be one of the primary examine that help maximise sales and increase
productivity and overall performance. The volume is needed to be determined by use of break
even analysis, cost volume profit analysis and other important aspects. Some importance of
volume analysis are discussed below:
Importance of volume
 Cost volume profit analysis: With the support of this analysis companies are able to
determine assorted alteration that can be made with cost and volume Carnival
cooperation and plc which have impact on overall performance (Masiero and Nicolau,
2012.).
 Break even analysis: Break-even analysis is a method that is used by manufacture and
management of company in order to determine the point where overall expenses are
equal to profit. So analysis tool help to ascertain company product and service those are
more profitable to travel and tourism company. As a Trainee Business Advisor, Carnival
Corporation & plc is are guided to compare fixed and variable costs with total sales
income in order to ascertain sales volume situation where there is no profit and no loss to
company.
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1.2: Analysing various pricing method that are being related with travel and tourism.
In present time, analysing pricing is consider to be crucial method that will give suitable
direction to travel company such as Carnival corporation and plc. This assist them to make plan
related to tour and travel packages in more certain and valuable manner. Company is also able to
fix prices of different services affiliated with touristy areas which will get paid by customers.
This support organisation to accomplish adequate measure of profit from that particular
investments at a particular time period (Mäntyniemi, 2012). Some of the basic pricing method
are discussed below that support to set economical cost:
 Competitive pricing: With the help of this method company are able to set prices of
different product and services as per competition in market. For instance Carnival
Corporation & plc have cruise brand named Costa. It is an Italian cruise line that is very
much popular among visitor because of its unique services. Thus the tourism company
keeps on changing their prices of services within Costa such as they charge higher, lower
or equal prices as per rival present, number of visitor during a time period etc. within
same industry.
 Cost plus pricing method: With the assistance of this method company are helpful in
deciding prices that are suitable to customer within a simplest sort. For example, Carnival
Corporation and Plc incur total cost 100 per unit for developing services and fix 70 per
unit price of service as a net income. In this case the final price determine of service
provided by company is 170.
 Cost based pricing: According to this valuation method company use to set selling price
as per profit percentage during a particular period. Thus manger of Carnival Corporation
& plc is making computation for net sales price of product and services as per producing
costs. In travel and tourism industry company use to fix amount of different services and
fix percentage of product cost that are further added to profit (Halkier, 2014).
 Value based pricing: With the help of this pricing procedure company use to fix a price
of services and product which is ultimate by demand of customer. Company used to
choose high prices when customer are more willing to travel whereas demand of product
is less company charge to draw attention of wide range of customers. For example
carnival corporation & Plc provide Princess cruise brand in which they fix the price
according to the guest capacity visiting and vice versa.
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 Promotional pricing: It is sales promotion technique who help the organisation to
increase sales. Spread awareness about carnival company's unique products in the
consumers. It runs television advertisement since 1984 and it become leader of
advertisement industry. It's promotional strategies include the price guarantee option that
attract the customers at high level. “Best price guarantee” it this scheme customer have
48 hours to find cheaper cruise price of another company.
1.3 Factors that influence profit in travel and tourism businesses.
In present time almost, every travel and tourism company are involving factors that are
focused to improve quality of services and increase sales in order to increase total profit. Being a
trainee business advisor it has been said that Carnival Corporation & Plc may derive assorted
elements that help to grow profit margin for future (Graham, 2013).
Seasonal variations : This variation is depends on the season because climate attract the
to tourist's. Some visitors prefer to visit at summer and some prefer to visit the countries at
winter season. So organisation make holiday trip plans on the basis on needs of consumers and
preferences. Carnival Corporation & Plc has also plans the trips on the basis of climate
conditions which attract the persons to visit. So it helps the organisation to maximize its profits
because it arrange trip as per the demand of tourist and it is important for travel and tourism
corporation to fulfil the desires of travellers. As it is observed that in spring season there are
large number of tourist visiting UK as this time is consider to be best for site seeing. Due to this
company charge higher rate for various services and increase the overall package. Similarly in
winter season the number of tourist decrease due to heavy snowfall and visitor for other country
are not habitual of too much cold. This impact in the reduction of price of tour package of
carnival or it is consider to be slow season for business.
Political environment: Political environmental factors can affect the business operations
of an organisation. So it is essential for Carnival Corporation & Plc to analyse the government
actions which can influence its business. These actions can be local, national and international
level. Tax rates which are decided by the government can impact the business of tour and travel
industry so it is essential for company to properly analyse this factors so that its profits does not
get influence. Corporation tax is also known as company tax that is directly imposed by the
government on the specific income or capital of company.
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Social Factor: These are consider to be important factor that may reduce the profitability
to business. It includes elements such as festival time, wealth, religion, lifestyle etc. For example
in UK there are number of festival celebrated throughout the year. During X-mas people visit
Different part of UK, thus travel companies like carnival corporation plc increase the rate of
cruise package in order to gain more profit. Similarly at the time of Easter Christine form almost
every part of world visit UK in order to enjoy the moment. Thus company increase the rate of all
packages an d provide the best services in order to makes visitor satisfy.
Competition: To provides the services and facilities to consumers as per current trends is
important for an organisation so that more number of persons can attract towards the company as
a result profits can be maximize. It there is trend of Italian cuisine but hotel is offering other
types of dishes to consumers as a result their needs can not be satisfy and it will affect the profits
of hotel (Fayos-Sola, 2012).
Financial position: This is consider to be effective process that help companies to make
decision in order to attain the competitive advantages. Manager of carnival corporation plc
analyse the information form annual statements and determine the financial position. They also
makes further plans to apply method such as cost based pricing, promotional pricing in order to
attain more advantage.
TASK 2
2.1 Different types of management accounting information
Management accounting information is essential for the manager and decision makers so
that they take important decisions related to finance. It is an efficient tool which is used to find
out effective decisions of an organisation. Tour and travel industry is growing faster so it is
essential for it to analyse financial statement, budget report and job cost report.
Budget report :
In present era, each company generate budgets in order to control expenses and increase
profit. Same as budgets report is prepared by manager of The Fulham Shore plc in order to
estimate budgets of different project and compare with actual performance at a particular period
of time. This also help in achieving set target and sustain long term financial growth (Engeset
and Elvekrok, 2015).
Financial statements:
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Accountant of company use to record every financial information into proper account so
that valuable decision are taken. These statements help manager of Fulham Shore plc to make
useful decision and ascertain the financial position of company. It is consider to be effective
management tool that consist of all required information such as balance of assets and liabilities,
equity etc.
Cash flow statement:
Cash flow statement is a financial statement which show the cash and cash equivalent
balance. Also check the effect of change in balance sheet and income statement. This statement
classified into three parts such as operating, financing and investing activity.
Balance sheet:
Balance sheet is a statement which prepare at the end of financial year. It shows the
actual position of business, it is divided into two parts first one is assets and another one is
liabilities. Assets side include current or non-current assets of the organisation and liabilities side
include current or non-current liabilities of the company.
MIS report:
Management information system required at every level of organisation, functional to
corporate level all are using for making daily activities report. This report help them to evaluate
or take decision on the basis of this MIS report.
Job costing report:
This report is prepared by manager in order to determine the total cost and income
generated from different jobs within company. Thus decision maker of The Fulham shore use
this report to discovery profitableness of different project. And take management decision to
insight job cost according to the need of company.
Types of financial decision
Strategic decisions: The decisions that directly related to strategic planning and
management policies are considered strategic in organizational context. These type of decisions
are taken to make smooth process of operations and business. Fulham Shore Plc wants to
purchase, operate and expand businesses in the restaurant sector, which in the Directors’ opinion,
have attractive growth potential. The Directors intend to use their collective experience to
identify appropriate investment opportunities for the Company in the UK (Strategic decision in
Fulham Shore Plc, 2018).
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Tactical decisions: These are the decisions that mainly related to the matters and the
policies of business decisions. Importance of top-level management remains high in tactical
decisions. The Directors of The Fulham Shore PLC ("Fulham Shore" or the "Gathering") are
satisfied to report the unaudited between time results for the a half year finished 23 September
2018 for Fulham Shore (Tactical decisions in Fulham Shore, 2018). Decisions related to
payment of bonus to employees of Fulham Shore Plc are a policy decision. On the other hand, if
bonus is to be given to the employees, calculation of bonus in respect of each employee is an
operating decision.
Operational decision: These type of decisions are mainly related to the managers and
day business for faced and managed with in the day. Managers and senior authorities give
approvals for new projects and aims related to decisions and management situations. For
instance, Fulham Shores Plc chose to Open 2 new Franco Manca pizzeria and One further Franco
Manca opened close Aldwych, London Increased eatery opening system made arrangements for
FY2020. This is one of the operational decision that may affect the organizational position and
structure. In this case prior approval to senior level authorities required for better analysis.
Training package:
Basis Requirement
Purpose  To make sure that business project are
handle and managed well so that risk
and problem are sorted.
 To increase the productivity and
efficiency among worker.
Format  To set format according to the number
of worker like low, high and medium.

Time of Training Two shifts
Morning: (10:00 Am to 1:00)
Evening: (4:30 pm to 6:30 pm)
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2.2 Use of investment appraisal techniques as decision making tools
In recent time, funds are consider to be sum of money that is used by company to perform
and sustain in competitive world. Capital budgeting is defined as the method that support in
taking investment decision. Some of the basic decision-making tools are discussed below:
Rate of return:
This method help in measuring the profitability and credibility of different project so that
most economical and beneficial can be selected. The manager of Fulham shore Plc used rate of
return method to determine investment that will give best return as a result in future. Thus the
make chose to decide either to continue with investment or select another investment (El-Gohary,
2016).
Pay back period:
With the help of technique company used for assessing assorted investment by making
decision on the basis of time taken by investment to give better result. This technique is used to
analyse particular cash flows so that result for company make all profits. This aid to form
impressive financial decisions, if NPV is more than zero then task is financially practicable.
Forecasting:
This tool help in decision making by the manager of company. With the support of
forecasting tool that help in planning, budgeting and predict overall financial growth. Thus
manager of Fulham shore plc are able to develop plans that help in managing and controlling
different project so that profitability can be increased.
Sensitivity analysis:
It is consider to be a examine of the Fulham Shore plc record and report that support to
determine uncertainness in end product of a numerical model or system. This provide assistance
which assist in making judgement about use of different sources. Therefore it aid in many
uncertain in the company that further used to make investment (Donaldson, 2013).
TASK 3
3.1 Interpretation of financial accounts of The Fulham Shore plc.
Income statement of FULHAM SHORE PLC performance in the year ended 25 March 2018.
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Balance sheet of FULHAM SHORE PLC.
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11

Statements of Equity of FULHAM SHORE PLC
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Cash flow statements of FULHAM SHORE PLC.
Interpretation of financial statement by using ratios.
In present world, procedure of assembling and grouping of useful data that help to draw a
plan and suitable model of progress (Ambrose, 2012). Financial analysis is defined as the
examine of annual and monthly balance sheet, income statements and cash flows. This help in
evaluating the financial position of The Fulham Shore with the help of different ratio analysis.
These are discussed below:
Ratio Calculations Analysis and Interpretation
Gross profit ratio/margin:
Gross profit margin is a
profitability ratio that
measures how much of
Formula
Gross Profit x 100/Net Sale
For example, Gross profit for
the year 2017 was £100M
Sales Revenue was £2,000M
With the help of gross profit
ratio know about the earning
capacity of company in the
terms of sales. Fulham shore
plc must maintain their gross
profit ratio as compare to last
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every £ (Pound) of
revenues is left over after
paying cost of goods sold
(COGS).
2017-18
22656 /54695*100=
41.42%
year. As per the above table
gross profit ratio in 2017-18 –
41.42% and 44.235 in 2016-
17. There is need to improve
performance of company.
Net profit margin ratio: (Profit after Tax/Sales
Revenue) X 100
2017-18
-565 /54695 *100
= -1.03%
From that above table it has
been analysed net profit
indicate the percentage of net
profit in terms of sales. The
company have -1.03% in
2017-18 and 2.40% in 2016-
17 and as a result in 2017-18
consider poor performance.
So the management of an
organisation must take
appropriate decision to reduce
expenses and increase
revenues.
Current ratio: Current ratio = Total Current
Assets/Total Current
Liabilities.
2017-18
5503 /12007
=0.46
Current ratio defines the
relationship between current
assets and current liabilities.
The ideal current ratio is 2:1.
The company have current
ratio 0.46:1 in 2017-18 and
0.28;1 in 2016-17. it shows
improvement in current ratio
in the year 2017-18 and they
have less than ideal current
ratio. So there is need to
increase current assets and
decrease current liabilities.
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Quick ratio: Quick assets: Current assets/
current liabilities.
2017-18
4013 /12007
=0.33
As per the above table
company having quick ratio
of 0.33:1 in the year 2017-18
and 0.2:1 in 2016-17 which is
shows standard quick ratio in
both year. There is need to
improve its quick ratio to
compete in the industry.
Return on Equity: {Operating Profit/(Total
Equity + Total Non-Current
Liabilities)} X 100
2017-18
(-565) /37632*100
= (-1.50%)
As per the above table return
on equity means owners
earning approx 15% to 20%
of return is advised as ideal.
The Fulham shore plc has
compared 2016-18 and get
that -1.50% return on equity
in 2017-18 and 2.51% in
2016-17. So it is shows that
in the year of 2017-18
performance of company
decline.
Return on assets: Return on assets: Net profit/
Total assets*100
From above result it has been
determined that the return on
assets for Fulham shore Plc
during year 2017-18 is 0 and
for year 2016-17 it is 1.63%.
The result display that return
on assets for year 2017-18 is
nil.
Return on capital
employed
2017-18
142 /53231* 100
As per the above table
company have 0.27% in
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= 0.27% 2017-18 and 3.21% in 2016-
17 return on capital
employed. It shows poor
return so they have to reduce
its operating expenses or
increase revenues.
TASK 4
4.1 Covered in Leaflet.
CONCLUSION
From the above report, its has been concluded that travel and tourism is increasing
rapidly, so it require funds in order to maintain the quality of services and goods and run their
daily business activity. Manager of company must use different method of pricing that help them
in expansion of business and increase overall performance and profitability. Techniques of
management accounting support in making valuable decision for the growth of company. Income
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statement, balance sheet are prepared and interpretation is done according to the ratio like
profitability ratio, liquidity ratio etc. Later examining few sources and distribution of funding
like international lottery committee to create the capital task.
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