Financial Analysis: Travel, Tourism, Funding and Management

This report provides an analysis of finance and funding within the travel and tourism sector, focusing on cost and volume importance in financial management, pricing methods, and factors influencing profit, using Carnival Corporation & plc as a case study. It explains different types of management accounting information and their use as decision-making tools, interprets travel and tourism financial accounts, and discusses sources and distribution of funding for capital projects related to tourism. The report considers both micro and macro level issues, offering learners a comprehensive understanding of financial systems and accountancy within the travel and tourism industry, highlighting cash flow, income statements, and balance sheets for financial performance evaluation.

Finance and Funding in Travel and Tourism Sector

Contents
Introduction:...............................................................................................................................3
LO1............................................................................................................................................4
1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.............................4
1.2 Analyse the pricing methods used in travel and tourism sector. You should use relevant
examples from different cruise brands of Carnival Corporation & plc.................................5
1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands as your case study..............................................................6
LO2............................................................................................................................................8
2.1 Explain different types of management accounting information.....................................8
2.2 Management accounting information as a decision-making tool....................................8
LO3..........................................................................................................................................11
3.1 Interpret travel and tourism financial accounts..............................................................11
LO4..........................................................................................................................................13
4.1 Sources and distribution of funding for the development of capital projects related to
tourism..................................................................................................................................13
Conclusion:..............................................................................................................................15
References:...............................................................................................................................16

Introduction:
The report gives the knowledge, skills and techniques to the new learners or trainee which
helps them in taking the management decisions. The main objective of this report is to guide
the viewers for gaining the information of the cost, volume and profit for managerial decision
making in tour and travel department. In this report, different methods of pricing and its
factors which influence profit for travel and tourism business are analysed. Different types of
management accounting system which is used for business as a decision-making tool will be
explained. The report also interrupts with the financial accounts of travel and tourism. The
report analyses the sources of funds which can be taken from the public and non public
departments and distribution of capital projects which are associated with tourism. This
report will consider the issues at both the level micro and macro, which helps the learners in
understanding the financial systems and depth accountancy.

LO1.
1.1 Explain the importance of costs and volume in financial management of travel and
tourism businesses using Carnival Corporation & plc as your case study.
Carnival Corporation & plc is the world’s largest travel company. The company has the
portfolio of 10 global cruise brands in North America, Europe and Australia. The main aim of
the company is to provide services to the millions of people (Shenkar, et. al., 2014).
Cost: Cost is an amount which the customer has to pay when he order something to get it to
return. It is the monetary value of expenses that occur in the business operation and activities.
Cost is the most essential factor as it affects the business activities. Carnival Corporation &
plc has to maintain the cost of the good and services for the satisfaction of the customers and
for the better functioning of the business. Different types of cost are incurred while the
execution of the operation of a business such as direct cost, indirect cost, variable cost and
fixed cost.
Direct costs are attributed to a particular project. Carnival Corporation & plc has a direct cost
such as travel cost airfare, meals, lodging, conference fees, etc. Indirect costa re those cost
which are not attributed to a particular project they incurred for common or joint objectives
(Kozak, 2013).For example repairs and maintenance, salary and wages, network charges for
email etc. In company Carnival Corporation & plc fixed costs are set in advance, cost which
occurs depending upon the number of tourist or the persons who have left the room,a cost
which has to paid by the tourist no matter whether they carry the room or not. Variable costs
are those which changes with the change in output such as cost depends upon the season,
suppliers, etc. Cost helps in improving the performance of the company and provides the
financial ability for travel and tourism.
Volume: It is of different types which is essential to analyse in the business travel and
tourism. Carnival Corporation &plc analysis the cost volume profit which helps in better
controlling, forecasting future and fixing prices.
Break-even analysis: It is the method of analysing the point where the travel and tourism
company will cover its cost which is spent on the customers. It is important for the company,

Carnival Corporation & plc to determine the break-even point to cover the cost of the
expenses which is spent in the given period.
Economies of scale: As the total output increases of the product, the cost per unit decreases.
If the number of tourist is increases for the company then the economy of the scale increases.
It is the reduction in the per unit production cost.
Diseconomies of scale: Diseconomies of scale creates when a company grows large that the
cost increases. When the economies of scale do not perform proper function then this
function takes place (Kozak, 2013).
1.2 Analyse the pricing methods used in travel and tourism sector.You should use
relevant examples from different cruise brands of Carnival Corporation & plc.
Every company uses different pricing methods in travel and tourism sector. The travel
company has different cruise brands which include Carnival cruise line, Princess Cruises,
P&O Cruises, Holland America Line, etc.
Market-led Pricing: In this method the prices are set by the company as per the market
prices as the competitors are charging the same price for the same product. The customers
get attracted and the organisation such as Carnival cruise line, Princess Cruises, P&O
Cruises, Holland America Line, etc. can face the competition in the market easily.
(Shcherbakov and Larsson, 2016).
Profit led Pricing: This method of pricing is based on the customers. There are two methods
in this competition pricing method and customers pricing method. In competition pricing
method prices are set according to the competitors and in customer pricing method the price
is set according to the customers demand.
Return on investment pricing: In this method of pricing, prices are analysed according to
the rate of interest and returns on investment. Holland America Princess Alaska Tours which
is operating the business of travel and tourism in Alaska and Yukon sets the prices according
to this method only.
Cost led pricing: The prices are determined according to cost and volume of the business. In
this method break-even point, profit margin cost is calculated to earn a huge rate of profit
(Shenkar, et. al., 2014). If any cruise brands such as Carnival cruise line, Princess Cruises,

P&O Cruises, Holland America Line, etc. set the price above the break-even point that means
they are getting higher profit than the other cruise brands.
Seasonal pricing: Seasonal pricing is based on the number of tourist visit in a particular
season. The whole year season changes so maximum tours vary according to the season. In
summer vacation holidays the number of business volume increases (Hilton and Platt, 2013).
Rack rates: This kind of method is used in broachers’ as the rates which are printed on them
are for the whole season. The business provides the actual rates without discounts or offers.
Last minute pricing: The price which is set at the last minute. The business has to manage
the booking of the last minute and set their prices accordingly. In travel and tourism business,
the customers set the booking at the last minute so the company has to manage them
accordingly.
1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation &plc cruise brands as your case study.
There are different factors which influence the profit for travel and tourism business. Profit is
the main motive for any organisation and it earns from the operational activities. There are
the internal and external factors which affect the profit of the business.
Events: Events invites the tourist to visit the place and have fun in the event. Events increase
the profit of the company as many customers are attracted to events. The cruises brand of the
company Carnival Corporation &plc organised many events which invite the tourist and
increases their profit.
Natural calamity: Natural calamities such as earthquake, disaster, tsunami, etc. also
influence the profit of the company. Most tourists do not want to travel to these places as they
are risky so they avoid such places to travel.
Currency rates: Different countries have different currency rates, so the profit also differs
accordingly (Goetsch and Davis, 2014) The government also play a critical role as it changes
the price of petrol, diesel, etc. As there are different cruises brands which are in different
countries of North America, Europe and Australia, so they have a different impact on profit.

Bad Debts:Bad debts are those amount which has to be received by the company from the
customers but it is still due. The company show this amount in profit and loss account and it
reduces the profit of the company Carnival Corporation & plc.
Political and Social environment: These two environments also affect the profit of the
company. Political factors such as taxation policy, foreign trades, legal rules and regulations
affect the tourist plan and also the profit margin of the company. Social factors such as
lifestyle changing, mobility, education, income distribution, etc. also affect the profit f the
company (Shcherbakov and Larsson, 2016).

LO2.
2.1 Explain different types of management accounting information. (2.2)

Management accounting information provides managers with relevant information and this
helps them to improve the effectiveness of decisions making (Hilton and Platt, 2013). One
other management accounting information is Management Information System (MIS) this
system provides management of the firm with regular information about the company. This is
a computerized system which generates automatic reports once it is provided with the
information. This helps the management to make important decisions efficiently.
The decision-making tools help the management in the process of decision making. This
improves the overall ability of the management to make decisions and helps the organization
to work effectively (Zahra and Mcgehee, 2013). The decision-making tools check the
performance of the firm from the current set criteria with reference to the profitability of the
firm, whether the sales and production targets have been achieved or not, etc. It helps the firm
to meet its objectives and fulfil the overall budgetary requirements. It also analyses the
solvency position of the firm and ensures whether the firm is solvent or not, if not, it can also
help in taking corrective measures. These tools are made for help ting the management of the

firm to make decisions regarding the management of the firm effectively. The Dalata Group
needs to make its decisions based on facts and figures so that it can continuously improve its
performance. The firm can use these techniques to improve its hotel management, with over
7700 rooms and Ireland’s largest hotel, the company needs to make its decisions with the
help of management accounting tools (Goetsch and Davis, 2014). These tools help the firm in
forecasting and preparing budgets, achieving the set targets, launching new products and
services and effectively managing the hotel business of the Dalata Group.

LO3.
3.1 Interpret travel and tourism financial accounts

Being the manager of the Dalata Hotel Group, the financial performance of the company has
to be evaluated (Dalata Hotel Group, 2017).
Cash flow: Cash flow statement of the companies includes the activities such as operating,
investing and financing. Cash flow from operating activity in the year 2016 is 77813 which
have increased in the year 2017 with the amount of 95207 (Dalata Hotel Group, 2017). Net
cash flow from investing activity in the year 2016 has a negative balance of 172056 which
has decreased in the year 2017 with the negative amount of 134794. Cash flow from
financing activity in the year 2016 is 30824 which have decreased in the year 2017 with the
negative amount of 23310.
Income Statement and Balance sheet: The gross profit of the company in the year 2016 is
180687 which have increased in the year 2017 with the amount of 220216. The earning per
share forthe year 2016 is 19.1% and in the year 2017 is 37.2%. The company’s financial
position has increased from the previous year. The total assets of the company in the year
2016 are 985376 which have increased in the year 2017 with the amount of 1101088. The
equity of the company has reduced from the previous year (Dalata Hotel Group, 2017).
Ratio analysis: Current asset of the company has increased from the previous year so in
current year company can easily meet with the availability of cash. The company has the cash
so that they can easily pay the current obligations. The quick assets of the company has also
reduced that means company less inventory or stock as compared to previous year. The net
profit percentage of the company has increased which means company has earned more net
profit as compared to previous year. The gross profit of the company has also increased from
the previous year which means the company has the ability to earn the profit for owners. The
company’s return on capital employed and return on net asset is increased from previous year
which means which means company’s financial position is stable, company can meet his long
term obligations.