A Report on Finance and Funding within the Travel and Tourism Sector

This report provides a comprehensive overview of finance and funding within the travel and tourism sector. It begins with an introduction to financial management, emphasizing the importance of cost and volume analysis. The report then delves into various pricing methods used in the industry, such as rack rates, seasonal pricing, and cost-plus pricing, alongside an analysis of factors that influence the profitability of companies like Merlin Entertainment, including economic conditions, social factors, and legal and political influences. The report also includes financial analysis, covering key ratios such as quick ratio, current ratio, and return on capital employed to assess a company's financial health and performance. Furthermore, the document also includes some content from PPT and a poster related to the topic. The conclusion summarizes the key findings and the references used are also provided at the end.

Finance and Funding in
the Travel and Tourism
Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of cost and volume in financial management:...............................................1
1.2 Pricing methods used in travel and tourism sector:..........................................................2
1.3 Analysis of various factors those are influence profitability of Merlin entertainment.....3
TASK 2............................................................................................................................................5
2.1 and 2.1: Covered in PPT...................................................................................................5
TASK 3............................................................................................................................................5
3.1: Financial analysis............................................................................................................5
TASK 4..........................................................................................................................................11
4.1: Poster.............................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance is the main tool in the business for getting operated. Each company using
effective management tools so that the price of the product can be lowered which would make
their business operations effective and this also makes business sustainable and reliable. Travel
and tourist industries renders completely diverse offers to customers concerning varied traveller
destinations. They integrates the traveller for rendering travel packages to their client as per their
preferences. Each business owner needs to know the exact requirement of its firm so that the
business objectives can be met within a set deadline (Zadek, 2011). The firm needs to make
their business operations effective and efficient by setting pre-set goals and objectives. Under
this project, importance of cost are analysed, diverse pricing strategies are used by the firm in
travel and tourism sector, diverse factors affecting profits of tour and travel sector, various
management information are used.
TASK 1
1.1 Importance of cost and volume in financial management:
In any firm, cost is the main tool to take decision in any firm. By ascertaining costs, firm
is able to make various decisions so that the business can achieve sustainable development. This
is the only thing on which competitors product price is determined. However, cost is separated
into two parts which are direct and indirect costs. These are defined as under:
 Direct costs: These are the costs which directly affects the production of goods and
services. These are material and labour cost, and this is the most crucial cost which assist
in making operational planning so that an adequate cost system at the time of taking
decisions in terms of handling cost system.
 Indirect cost: These are the costs which are not directly linked with the cost of
production. But, ultimately contribute for making product or services sustainable
(Kwong, Jones-Evans and Thompson, 2012). With the help of this cost, company is able
to predicts the estimated costs and labour in rendering services which could help out the
firm to stop the least losses.
 Variable costs: This is the cost which vary in an extra unit cost of production. As,
Marlin entertainment plc firmly accumulates on making particular and memorable
visitors experiences with its passion.
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 Fixed cost: It is the cost that are constant and does not change with the change in the
unit.
 Cost-volume profits: it is the crucial tool which provides reliable information for
management for making plan and make an efficient decisions. This sector produces
outcomes for growing the business (Travel and Tourism Management, 2017). CVP is the
key essential assessment of linking among profits, selling price and total fixed costs.
1.2 Pricing methods used in travel and tourism sector:
There are such a significant number of components those impact the estimating
techniques which is utilized as a part of travel and tourism division, for example, unique areas,
individuals, economy and so on. These segments are having various evaluating procedures of
tourism business. Following are pricing strategies that are utilized as a part of taking choices of
evaluating in any visit and travel area:
Rack rates: This is a rate which is called as "full rate". It is a cost, on which no rebates
are connected prior and this is normally a rate that is given to entire customers. It is imprinted on
the booklets also (Warner, 2013). These rate can likewise differ as per the day. For instance rack
rates can be demonstrated more quick on closing of the week in relation with general days since
individuals go for visits various attractive tourist destination in different parts of the nation.
Occasional evaluating: As it is demonstrate from innocence, it basically signifies a
strategy for estimating in which benefits can be made more in those seasons which are on pick
for visit and ventures business and these benefits will remunerate the misfortunes happened
when there was no request and there were low deals. It changes as per the request of clients.
While there is low request the costs will likewise go ease back to asked individuals.
Cost in addition to technique for evaluating: This is a strategy in which the cost
acquired in any products and enterprises gave by organization and other work costs are
incorporated and after that settled level of benefits are to be included us in that cost. After that
the value that includes is resolved as perfect esteem.
Cost drove valuing technique: Under this plan of techniques a settled % of the
aggregate cost is included measure of cost touched base for item and administrations. At that
point the last cost is touched base at which deals are to be made.
Market drove estimating: This cost is resolved in the wake of making a profound
research in showcase. This cost is relying on the request of item and administrations in advertise.
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In the wake of evaluating requests of clients, organization creates and ad libs their merchandise
and enterprises.
Very late estimating: These costs are essentially marked down costs which are utilized
on consistent schedule and it fills the hole between the accessible stock finally minute. These
valuing strategies are advanced on various site. Sorts of basic evaluating are as per the following:
Cost plus pricing: Under this pricing, price is set as per the cost which is related with
any services provided by Tourism Company (De Haan and van den End, 2013). The profits
which is earned during the point of time is decided on that basis and then it is directly included in
it.
Market led pricing: In this method, competitive market analyze is done analyze so that
company should charge amount as per the competition prevail in the market. In this price is
decided by making complete research on market situation and customer demand.
Seasonal pricing: In case of travel and tourism business, it has been seen that customers
are making their tour plan according to the season. Most of them are use to visit in summer as the
chances of getting maximum discount is more. Like hotel and accommodation prices is low or
having discount rate.
1.3 Analysis of various factors those are influence profitability of Merlin entertainment
Merlin entertainment has hotels and holiday villages in different countries. The quality
services of company helps them to increase the profitability of company. This helps to expand
the activities of business (Shiller, 2013). To increase the profitably, company needs to
understand the customer preferences and to satisfy their wants. This helps the company to attract
more customers. There are many benefits of the increased profitability of company are:
l Expansion of business: Profits of the company are deploy in the expansion activities of
company. This helps the company to increase their market share and attract more
customers.
l Maintain quality of services: Profits of company helps to maintain the quality of the
services provided by them. It is the main aim of the company to maintain the quality as
per the customer needs.
l Increase brand image: Higher profitability helps the company to provide diversified
activities as per the requirements of customers. This helps the Merlin to increase the
brand image of company in between customers. The quality luxurious services of hotel
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helps to attract large number of customers. New advertisement methods and innovative
ideas helps the hotel to improve their brand image.
But there are many factors which persists in the market which affects the working and
profitability of Merlin entertainment. These factors are described below:
l Functions host in country: If there is any special function is hosted by country then it
effects the sales of hotels. At this time all the hotels are overbooked. This situation
increase the sales and profitability of Merlin entertainment also (Munnell, Aubry and
Quinby, 2011). But after these functions the profitability and sales of the hotels decrease.
So, there is huge impact of these special functions.
l Economic condition: Economic condition persists in the country affects the sales and
profitably of Merlin in both positive and negative way. If the economic condition of the
country is not good and there is recession, low income of peoples, less cash inflow in
economy affects the business of hotels adversely. If the people don't have enough income
then it decreases their spending power. This will reduces the sales and profitability of
hotels.
l Social factors: In includes the behaviour of consumers, preferences and their belief. All
these factors has great influence on the profitability of hotels. For ex. Young generation
wants to go adventures places more then commercial places. This also affects the hotels
which operates their business in commercial areas (Lazonick and Tulum, 2011). So, to
increase the sales and profitability, it is required to understand the consumer preferences.
Another social factor is education which affects the profitability of cited hotel.
l Legal factors: It includes the factors like change in employment laws on working hours.
This effects the management of company regarding managing the activities of employees.
It also affects the performance of employees of hotels which reduces the capability to
generate more profits (Skeel and Jackson, 2012). For ex. If the working hours are reduced
to 7. Then it reduces the productivity and efficiency of the services of company provided
by them (Social and Economic Aspects, 2015). This will reduce the overall profits of
hotels.
l Political factors: This includes the factors related to the government of country. If the
government is stable and the polices are liberal for the operation of the activities of hotel
then it helps them to increase their sales and profitability. The profitability of Merlin is
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also depend upon that scenario (Gilje, Loutskina and Strahan, 2016). Liberal policies
gives them chance to earn more profits. On the other hand, If the government has strict
policies regarding operation of the activities of hotel industry, it has negative effect on
profits.
TASK 2
2.1 and 2.1: Covered in PPT
TASK 3
3.1: Financial analysis
In this phase, various ratios are needed to be calculated in order to make statements more
reliable and effective for decision making:
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There are various ratios are need to be calculated in order to analyse performance of the
company. Some of them are mentioned underneath:
 Quick ratio:- As per this element an organization can easily measure the mode of
meeting its short term financial liabilities. Another name of this factor is acid test ratio.
By the use of this ratio, liquidity position of the company will be determined (Gregson,
Mann and Harrison, 2013). It will also help to provide necessary information that whether
the company is able to meet out is financial requirements or not. According to the
information, company is maintaining positive position and can be indicate that ratio is
increasing from 0.23 to 0.32.
 Current ratio:- It shows the liquidity ratio of an enterprise that measures potentiality of a
company in order to pay short or long term responsibilities (King, 2013). Thus, it shows
the amount of liability on an organization. By using this current assets and liabilities is
been compared and its ratios will be identified. The ideal ratio under this situation is 2 so
the assets must be double from its total liabilities. It is calculated as 0.28 and0.36
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respectively. It means that there is requirement of making more investment in current
assets.
 Return on capital employee:- According to this factor, mangers of an association
analyse the profitability and skilfulness by which their capital get employed. With the
help of this, it will decide that how much is earned on the total amount which is used as
capital employed (López-Espinosa and et. al, 2012). It has been found that they are
getting increase with higher rate which is supposed to be more positive sign for the
company.
 Net profit ratio: - It is the profit or benefit which is calculated by deducting entire
expenses of business such as; interest expenditure, taxes as well as dividend stocks which
are given to various shareholders. By using this, total amount of profit which is earned by
the company is determined and ratio is computed by comparing it with total revenues.
The company is having its work in more effective manner as its profit is kept increasing.
 Gearing ratio: - Highlighting a financial quantitative relation which compares certain
form of entrepreneur capital to monetary resource acquire by the organization. The
proportion between equity and debts should be maintained in such a ways so that
maximum advantages can be increase (Smith, and et. al., 2011). The total amount of
liabilities should be evaluated at par value with that of equity otherwise; it should not be
profitable for the company. The outstanding debts in the mentioned situation is increasing
that should be controlled by taking some effective actions.
All of those can be analyse by observing following tables:
Marline Group Plc The Restaurant Group plc
Liquidity/Financial
Health 2015-12 2016-12 2015-12 2016-12
Current Ratio 0.98 0.97 0.28 0.35
Quick Ratio 0.75 0.76 0.12 0.2
Financial Leverage 2.39 2.31 1.65 2.02
Debt/Equity 0.95 0.87 0.12 0.2
Marline Group Plc The Restaurant Group plc
Profitability 2015-12 2016-12 2015-12 2016-12
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Tax Rate % 28.27 23.83 20.68 —
Net Margin % 13.3 14.48 10.05 -5.65
Asset Turnover
(Average) 0.46 0.48 1.54 1.6
Return on Assets % 6.16 6.99 15.44 -9.02
Financial Leverage
(Average) 2.39 2.31 1.65 2.02
Return on Equity % 15.43 16.43 26.09 -16.29
Return on Invested
Capital % 8.93 10 23.2 -13.56
Interest Coverage 6.15 7.02 49.52 -22.44
From the above information, it can be found that cash balance can be maintained in right
way that would be more profitable for the company. This is helpful for Merlin Plc to make
necessary investment in coming future projects (Pistor, 2013). As, they are having sufficient
amount of profit to meet out is debts. The efficient and sustainability can be enhance if they are
following corrective measures to minimising their risks and cost. The above mention analysis is
based on performance of two company's such as The restaurant group and Merline group Plc.
The data is collected from the financial statement of both the company. They are happen to be
the close competitor in same business. The liquidity position of the company is more healthy for
Merline group. It means that they are having sufficient amount to cover there outstanding debts
as compare to other company the restaurant group. Whereas, the profitability position of
restaurant group is more effective as compare to merlin plc. They are getting sufficient amount
of return on assets and equity. The interest coverage ratio is showing negative for restaurant
group in comparison to merlin group which is more positive with 7.02%.
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TASK 4
4.1: Poster
CONCLUSION
From the above project report, it has been concluded that finance is an essential part of
any business whether travel or tourism. This project provides necessary information that in order
to carry out a well organise business travel and tourism sectors need to have perfect support of
capital. There are so many effective decisions which are required to be made for getting more
effective outcomes. This project also covers various pricing strategies which are used by Merlin
plc in order to provide attractive tour packages to their customers. The impact of tourism sector
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on external environment is also discussed in it. Financial analysis of business is done by using
various financial statements such as income statements, balance sheet and cash flow statement.
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REFERENCES
Books and Journals:
Pistor, K., 2013. A legal theory of finance. Journal of Comparative Economics. 41(2). pp.315-
330.
Smith, J.B., and et. al., 2011. Development and climate change adaptation funding: coordination
and integration. Climate Policy. 11(3). pp.987-1000.
López-Espinosa, G., and et. al, 2012. Short-term wholesale funding and systemic risk: A global
CoVaR approach. Journal of Banking & Finance. 36(12). pp.3150-3162.
King, M. R., 2013. The Basel III net stable funding ratio and bank net interest margins. Journal
of Banking & Finance. 37(11). pp.4144-4156.
Gregson, G., Mann, S. and Harrison, R., 2013. Business angel syndication and the evolution of
risk capital in a small market economy: evidence from Scotland. Managerial and
Decision Economics. 34(2). pp.95-107.
Gilje, E.P., Loutskina, E. and Strahan, P.E., 2016. Exporting liquidity: Branch banking and
financial integration. The Journal of Finance. 71(3). pp.1159-1184.
Skeel Jr, D.A. and Jackson, T.H., 2012. Transaction consistency and the new finance in
bankruptcy. Columbia Law Review, pp.152-202.
Lazonick, W. and Tulum, Ö., 2011. US biopharmaceutical finance and the sustainability of the
biotech business model. Research Policy. 40(9). pp.1170-1187.
Munnell, A. H., Aubry, J. P. and Quinby, L., 2011. Public pension funding in practice. Journal
of Pension Economics & Finance. 10(2). pp.247-268.
Shiller, R.J., 2013. Capitalism and financial innovation. Financial Analysts Journal. 69(1).
De Haan, L. and van den End, J.W., 2013. Banks’ responses to funding liquidity shocks:
Lending adjustment, liquidity hoarding and fire sales. Journal of International
Financial Markets, Institutions and Money. 26. pp.152-174.
Zadek, S., 2011. Beyond climate finance: from accountability to productivity in addressing the
climate challenge. Climate policy. 11(3). pp.1058-1068.
Kwong, C., Jones-Evans, D. and Thompson, P., 2012. Differences in perceptions of access to
finance between potential male and female entrepreneurs: Evidence from the UK.
International Journal of Entrepreneurial Behavior & Research. 18(1). pp.75-97.
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Warner, M.E., 2013. Private finance for public goods: social impact bonds. Journal of Economic
Policy Reform. 16(4). pp.303-319.
Online
Social and Economic Aspects. 2015. [Online]. Available through; <http://www.isb.ie/what-we-
offer/social-economic-aspects-ireland/>. [Accessed on 20th November 2017].
Travel and Tourism Management. 2017. [Online]. Available through:
<https://www.northampton.ac.uk/study/courses/travel-and-tourism-management-hnd/>.
[Accessed on 20th November 2017].
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