Finance and Funding in the Travel and Tourism Sector Analysis

This report delves into the financial aspects of the travel and tourism sector, examining key concepts such as cost-volume-profit analysis, pricing methods, and the importance of cost control. It analyzes the impact of internal and external factors on profit margins, using case studies of Carnival Corporation Plc and Dalata Hotel Group Plc to illustrate financial strategies and performance. The report discusses various pricing methods used in the industry, including profit-led, market-led, cost-plus, and seasonal pricing. It also explores the application of management accounting information, including budgets and cost allocation, for effective decision-making. Furthermore, the report includes a financial ratio analysis of Dalata Hotel Group Plc and identifies sources of funding for capital projects within the tourism sector, providing a comprehensive overview of financial management within the industry.

Finance and Funding in
the Travel and Tourism
Sector

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Importance of costs and volume in the travel and tourism business.....................................3
1.2 Discussing various pricing methods to used by travel sector...............................................5
1.3 Determining factors which are directly or indirectly impacting travel and tourism sector. .6
TASK 2............................................................................................................................................7
2.1 Management accounting information along with its different types on basis of Dalata
Hotel Group Plc..........................................................................................................................7
2.2 Uses of management accounting information in terms of decision making tool..................8
TASK 3............................................................................................................................................9
3.1 Calculation and interpreting financial ratio of Dalata Hotel group plc.................................9
TASK 4..........................................................................................................................................11
4.1 Justifying various sources and distribution of funds in tourism for capital projects..........11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Travel and tourism business is giving huge contribution in economy as its trend is
increasing on daily basis among whole population. Finance and funding is termed as basic
concept which is mandatory for every business for growing in better aspect and for economy as
well. The present report is giving brief understanding of concept of travel and tourism by
referring Carnival Corporation Plc and Dalata Hotel group plc. The Carnival corporation is
making plans for a trip and accordingly cost volume profit analysis has been prepared by
selecting appropriate strategy. This report is also signifying importance of cost and volume in
context of financial management. It is also elaborating various methods of pricing whose
applicability with reference to travel and tourism sector. The report is also identifying factors
which are impacting to margin of specific business. Further it has been discussed about uses of
management accounting information along with its types. The financial information of Dalata
Hotel Group Plc has been stated along with its proper analysis of financial ratio. In the same
series, different sources of fund has been identified with reference to capital projects.
TASK 1
1.1 Importance of costs and volume in the travel and tourism business
Costs are required to be controlled in a better way so that it may not exceed over revenue.
It leads to loss for the company if costs incurred are more in comparison to the profit generated.
This means that expenditures should be less leading to enhancement in profits and volume. In

relation to this, CVP (Cost Volume Analysis) is used to assess cost of sales and then measures
are taken to implement that price by which sales are maximised and profits as well. Carnival Plc
which is engaged in tourism business has 10 cruises in many nations. It can be said that CVP
analysis will be helpful in pricing tour packages and thus, it will try to achieve break-even point
so that it may enjoy adequate profits in hand. It would provide clarity to Carnival Plc to form
packages and take relevant decisions leading to more income (Morrison, 2013).
Volume of sales are to be assessed so that it may be able to have clarity with regards to
prices to be implemented and thus, desired income may be garnered. The importance of CVP
analysis in business is listed below-
 Expenditures like cost of administration, overheads can be estimated helping in attaining
sales with much ease. Furthermore, break-even point is also helps company to at least
reach the mark so as to accomplish no profit no loss situation.
 Sales volume is effectively kept up because of Margin of Safety is used. It is a difference
between actual sales and break-even sales. Hence, volume is maintained in desired way
so that it may not lead to decrease in overall profits.
 Carnival Plc will be able to initiate proper control over costs and can quote better price of
tour packages of its various cruises. It will be helpful in attaining volume of sales and
profits would be attained quite effectually.
 There are various costs such as direct, indirect, variable, fixed and semi-variable which
are to be incurred in order to have sales volume generation. However, it is required that it
should be controlled quite effectively so as to inject overall sales and profits.
 Furthermore, contribution margin is useful term in CVP analysis in which firm subtracts
fixed and variable costs from sales volume and thus, profit is calculated. Sales are
required to be enhanced so that profit may be maximised and good quantum of revenue
may be produced leading to more productivity. Hence, CVP analysis is significant in
travel business.
 It provides crystal clear image with regards to services sold by Carnival Plc. This helps
management to take viable decisions if any of the services are deficient or not. Hence,
improvement can be easily made with regards to the products and services. Profit level
can be maintained by firm and packages may be sold to passengers leading to enhanced
profits.

 Desired income can be accomplished by organisation because CVP analysis help to
effectively initiate balance between these three elements. Moreover, Carnival Plc can
attain good quantum of profits by reducing costs. Thus, it is quite significant in tourism
business to attain profits.
1.2 Discussing various pricing methods to used by travel sector
Pricing should be properly implemented so that more of passengers may be attracted to
packages of company. If more prices are charged, then firm will lose its customers to rivals and
if less is charged, then desired income cannot be accomplished. To overcome this, proper method
should be chosen for attaining dual benefits such as maximum profit at least possible cost. The
pricing methods are described below-
Profit-led method-
The profit-led method is useful for company to quote so that customers are not lured by
competitors. Price of packages can be charged in relation to that of rivals so as to attain profits
and customers in effective manner. This helps to achieve desired profits and market share can be
accomplished in a better way. The demands and needs of customers are assessed and as such,
perfect pricing method can be implemented in order to attain more passengers. This helps firm to
attain profits as Carnival Plc may charge prices and achieve desired income (Spenceley, 2012).
Market-led method-
This pricing method is quite effective as company is required to charge prices in the
context of market which is adopted by it. This means penetrating pricing strategy is followed in
the market-led method so as to charge lower prices and to gain more customers. It is required in
the initial stage to capture market. Profits generated are lower but quantum of sales volume is
maximised which means that losses or low profits can be achieved at later stage when customers
become loyal to organisation. Hence, it can be used by company to achieve more market share.
Cost-plus pricing-
It is common method utilised by travel and tourism sector. It means that certain amount
of profit is added in overall cost of the services and products. The increased figure is obtained
which is a final amount of service purchased by customers. In relation to this, Carnival Plc can
easily achieve profits by adding percentage of margin in total cost of various tour packages
organised by it. The firm may be able to achieve profits and customers are easily attracted to it.
Hence, pricing method can be implemented by the firm and thus, it will be fruitful for it.

Seasonal pricing-
The seasonal pricing is generally used in main seasons where customers wants to travel
along with friends and family. High prices are quoted in peak season and more quantum of
profits can be attained by it. This means that Carnival Plc can achieve profits and losses can also
be recovered in off-seasons. Hence, it is useful method of pricing as skimming up to a high
extent will not divert passengers to rivals. Moreover, company can easily achieve profits as it has
good reputation in the market. Hence, firm will be able to garner profits quite effectually.
1.3 Determining factors which are directly or indirectly impacting travel and tourism sector
The financial advantage has been referred by profit which has been earned from all
activities related to business operations. Every big and small company gives special focal point
to earn profit. There is presence of different factors which are affecting industry's profit margin
and in the same series Carnival corporation Plc will be also affecting its margin. This will be
directly interlinked with business of full organization. The factors are categorised in two aspects
which are stated below:
 Internal Factors
 External factors
Internal Factors
Bad debts: Usually it arises from situation when payment has been not paid by customer
on fixed basis services whose benefits are taken by him. In the same series if charges are not
received by customer to Carnival corporation then it will be termed as bad debts and it will
directly reflect in income statement as it will be reducing margin of organization. There will be
presence of contribution of cost which will be covered by business as expenses such as salaries
and wages and it is directly linked to staff. If cost has been increases then it will affect profit of
the organization. The investment will be estimated in context of future as a part of planning
process which will be according to current margin (Zapata and Hall, 2012).
External factors
Competition: The profits are termed as very vulnerable for new entrants as they are
regular in external. Penetration policy has been adopted as it direct affect its existing players in
context of profitability and it also faces difficulty for matching with trend of low prices of new
player every time.

Political environment: It consists of regulations of foreign trade and government along
with different taxation policy and legal alterations which are directly affecting business activities
in context of specific organization. Carnival corporation will be incurring huge loss when there is
any booking of international package in old currency and there is decline in there domestic
currency in context of foreign currency.
Social environment: There is presence of various changes in population demographics,
income distribution, social mobility, behaviour in context of leisure or work and level of
consumerism and education will be affecting profit of Carnival corporation plc.
Seasonal variation: Mostly tourists are attracted with reference to seasons, as they plan
their trips in summers or holidays. The business volume is altering on basis of different seasons.
Accordingly, variations due to season are directly impacting earning of the company.
TASK 2
2.1 Management accounting information along with its different types on basis of Dalata Hotel
Group Plc.
Management accounting information lay special emphasis on decision makers and
internal managers as well. Its main application is to give relevant financial data in context of
operation by manager by putting efforts in context of making very sound decisions about
business. Management accounting information usually comes in the context of budget forecasts,
cost accounting, variance analysis and financial ratios. If these managements accounting
practices are not followed then decision making would be similar to gambling or it might be
termed as less of a science (Pike, 2012). In the same series there are various types of
management accounting information which are stated below:
 Budgets: For determining amount of money should be spend on specific business budget
has been prepared by management accountants. Generally limits have been set for
context of expenditures related to business for ensuring about Dalata Hotel Group plc is
not overpaying for its business inputs or economic resources. There are presence of
different types of budget which is used in management accounting such as master budget,
flexible budget and standard budgets.
 Cost allocation reports: It is referred as one of primary function in context of
management accounting. It represents amount of capital which is spent on every kind of
economic resource or input and ways for allocating cost of specific resources to services

and goods. There is presence of common cost allocation methods which are process
costing, job costing and activity based costing. This information is used by managers who
provides surety about services and goods which is produced by Dalata Hotel group plc
for getting perfect amount of cost and charges for ensuring that organization must recoup
its cost of production with particular level of margin.
 Forecasting: It is one of the essential part of management accounting. Usually economic
forecasts have been done by management accounts for identifying potential sales of
services and goods to its customer under particular market conditions. There is presence
of forecasting reports which are very common such as calculations of net present value,
decision trees and many more mathematical and statistical forecasting models. Usually
this information is linked towards organization's management to take decisions related to
increment in production or output which is seeking operations of new business for
meeting future consumer demand (Von der Weppen and Cochrane, 2012).
2.2 Uses of management accounting information in terms of decision making tool
Cost of capital: It is very important factor for framing structure of capital in balanced
and optimal aspect. The decisions related to cost of capital, there is basic need for identifying
goals of management and for increasing organization's valuation and it must be having ability to
decrease cost of capital.
Forecasting: There should be presence of all financial which should be forecasted and it
will contribute in process of decision making which will be giving full fund's structure of Daltan
hotel group plc which will be utilising its resources in very systematic manner and it will impact
usage of funds in specific manner (Management accounting information, 2018).
Decisions in context of investment: The capital resources should be optimised and
utilised properly for getting efficient return and investment decisions which are undertaken.
There is basic necessity of every business that it should be careful while selecting the best option
regarding investment so it will adopt growth strategy in according to this.
Solvency: The organisation's solvency had been indicated by its capacity for
accomplishing financial commitments in perspective of long term. The organization's cash flow
should be tracked and it must be sufficient for pertaining long and short term liabilities as well.
There are various possibilities for default scenario of its debt obligations due to low solvency.

Finance should be planned: The organization's finance should be planned with financial
transaction of future and budgets should be prepared. It is contributing in huge proportion for
process of decision making via manager and all essential activities should be decided as its
requirement for objective of funding in the future (Murphy, 2013).
TASK 3
3.1 Calculation and interpreting financial ratio of Dalata Hotel group plc.
Financial ratios (2016 – 2017)
The Financial ratios of 2016 and 2017 are stated in below table which is indicating
financial performance of these two years. It helps in assessing comparison and health from its
industry about its operation in systematic manner or not. It is representing liquidity, solvency,
efficiency and solvency ratio as well. The performance of organization has been clarified in
appropriate manner.
Interpretation: These ratios are indicating profitability of Dalata Hotel group Plc. There
has been increment in gross profit ratio by 1% which is indicating that Dalata Group has better
earning capacity in ease manner. It can be implied that it has created ability for controlling its
expenses and in context of outcome, profits are also raised systematically. In the same series net
profit ratio is also increasing but it had raised by huge difference by approx 7% which can be
interpreted that organization had controlled over its expenses in context of operation. The return
on capital employed and equity is also raising as in context of capital employed sales are

generated on specific investment in the best possibilities. The organization's viability and
stability has been raised and evaluated in ease aspect. In the context of equity, shareholders
investment has been utilised to great extent and in systematic manner (Swanson and Edgell Sr,
2013).
Interpretation: These ratios are indicating liquidity of Dalata hotel group plc. As it is not
performing very well in this aspect. The current ratio of 2016 to 2017 is decreasing to 1.44 : 1 to
0.46 : 1 respectively which states that it is in difficulty for repaying its debt in specified duration.
In the same series quick ratio is also decreasing from 0.83 : 1 to 0.35 : 1 which is presenting that
difficulty has been faced for repayment of its liabilities from its all liquid assets.
Interpretation: The above table is indicating efficiency ratio in context of its turnover of
receivables and stock as well. From year 2016 to 2017 it is decreasing which can be articulated
that Dalata Hotel group Plc has created ability to collect its full amount by its creditors. In the
same series, there is representation of stock turnover ratio which is increasing from year to year
as its inventory has been not utilised in very systematic manner. The creditors' payment ratio is
decreasing from 2016 to 2017 which is replicating that Dalata is not able to make its payment in
very systematic aspect.

Interpretation: The above table is representing solvency of Dalata Hotel group plc by its
gearing and debt to asset ratio as both are decreasing from 2016 to 2017. In context of gearing
ratio, the company is relying on financing from equity as compared to debt to 0.43 to 0.33. In the
year 2016 to 2017 gearing ratio is decreasing from 0.25 to 0.22 which is representing overall
financial stability for enhancing Dalata Hotel group plc (Buckley, 2012).
TASK 4
4.1 Justifying various sources and distribution of funds in tourism for capital projects
Sources
National Lottery commission:
Its abbreviation is known as NLC which is considered as very essential and effective
source of funding which helps in giving finance to tourism industry in very effective aspect. The
players who shows keen interest in lottery and interest is safeguarded in appropriate manner are
protected by commission. It is very vital concept which will be providing protection and in
context of outcome, players will be safeguarded and there is huge possibility of playing fair
game. It will be ensuring that underage players are not permitted in such types of games and
along with this it creates surety about funds which are routed in perfect manner.
European Social Fund:
Its abbreviation is known as ESF whose objective is to impart the best employment and
career opportunities to all employees. There has been investment on capital projects which is
according to local basis. The ESF is most important concept in travel and tourism sector as it
provides better employment to European community in very ease manner. In the same series it
helps in allocating it funds in very appropriate manner and in terms of outcome it provides best
career opportunity to its citizens.
Non Public Funding
Equity financing:
It is one of major source of funds which is especially used by big organizations for
increasing there finance by selling stock in very effective manner in specific market and it

collects funds in particular aspect. It can be easily meant that any organization can accomplish its
finance which is desired by selling its shares in very effective manner with its full possibilities. It
is termed as very helpful source for increasing finance as it does not have any obligation for
arising repayment about any interest as it is not similar to debt. It can be also applicable for
getting fund for accomplishing about operational activities.
Debt Financing:
Huge funds has been given by creditors to travel and tourism business as it has ability to
carry out its all activities in effective manner. Indebtedness has been carried out in terms of loan
which is repaid accordingly. There is also requirement of paying principal amount along with
accrued interest. In other words it can be articulated that organization is required to pay debt and
interest together. It is termed as one of most cheap source of fund for business of travel and
tourism. In the context of operational task, firm can easily accomplish it by optimising its debt
finance is appropriate manner (Chaisawat, 2012).
Capital Projects
Small scale tourism:
It is considered as very essential for enhancing so that travel and tourism business will be
attaining its profits in very ease manner. The government will be giving grants in which tourism
on basis of small scale will be creating ability for earning profits. Its major requirement is used
for exploring rural areas and profits will be accomplished by guests. So in the same series
government will be providing finance for encouraging and enhancing tourism industry in nation.
Tourism Information point:
Its abbreviation is known as TIP which is very effective for passengers which is used for
assisting in exploring number of destinations in very specific manner. It can be indicated that
queries of customer are solved with reference of TIP so it will be creating ability to freely roam
and travel to different destinations. There should be specific contact TIP as there is absence of
knowledge in context of new city and problems should be solved very effectively. All the guests
will be assist by customer care executive so they will be able to explore whole city with proper
ease.
CONCLUSION
From the above study it can be concluded that for every business finance and funding is
termed as very essential concept as it helps in attaining specific task in very systematic manner.