Finance and Funding Strategies in Travel and Tourism Sector Analysis

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, focusing on two companies: Carnival Corporation & plc and Dalata Hotel Group plc. It examines the importance of financial management, highlighting the significance of volume and costs. The report delves into various pricing methods used in the industry, including seasonal pricing, rack rates, and market-based strategies, while also analyzing the factors that influence a company's profitability, such as seasonal variations, political and economic environments. Furthermore, it explores the interpretation of financial accounts and discusses funding sources for capital projects within the travel and tourism context. The report covers topics such as direct and indirect costs, variable and fixed costs, and the impact of factors like Brexit on tourism. It also examines the application of cost-volume-profit analysis and break-even point analysis in the industry.

Finance and Funding in the
Travel and Tourism Sector

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of volume and costs in financial management of travel and tourism businesses
.....................................................................................................................................................1
1.2 Different pricing methods used in the travel and tourism sector..........................................3
1.3 Various Factors influencing profit for travel and tourism businesses...................................4
TASK 2............................................................................................................................................5
Covered in PPT...........................................................................................................................5
TASK 3............................................................................................................................................5
3.1 Interpret travel and tourism financial accounts.....................................................................5
TASK 4..........................................................................................................................................13
Covered in Leaflet ....................................................................................................................13
CONCLUSION ............................................................................................................................13
REFERENCES................................................................................................................................1
.........................................................................................................................................................1

INTRODUCTION
Finance is an important and necessary resources for each and every enterprise in order to
do all activities in an appropriate manner. It plays a vital role in handling all operations and
functions of the business entity. Funding is also an essential activity and term that shows towards
developing financial resources from different alternatives that are present in the marketplace.
Value of handling finance, it is valuable and significant for each organisation to achieve their
desired goals and objectives in limited time period (Buhalis and Darcy, 2011). It enables
business to provide effective services and products to its clients if sufficient capital is available.
But, in way if enough capital are not existence, then it may generates difficulties or problems.
Travel and Tourism sector is one of the quickest growing industry.
This project is based on two different companies i.e. Carnival Corporation & plc. &
Dalata Hotel Group plc. Both these firms operate in travel and tourism industry. This report
considers the importance of financial management and its elements. It also identifies different
types of pricing strategies used by tourism sector and various factors that affects the profitability
of company. Apart from this, usage of management accounting information as a technique of
decision making is also determined in this study. Distribution and sources of funding for the
improvement of capital projects are also discussed here.
TASK 1
1.1 Importance of volume and costs in financial management of travel and tourism businesses
Financial resource management is necessary and essential for all enterprises in order to
achieve long term advantages from the marketplace. Carnival Corporation & plc, it is a travel
and tourism industry which is run in different nation such as North America, Australia, Europe
etc. It is a biggest leisure company in all over the globe (Choi and Turk, 2011). In tourism sector,
there are few prospects that are concerned with importance of volume and cost in financial
management. These are described as below:
Volume: It is also essential and important term which refers to the net quality and expenses of
services. It denotes the financial value of company in marketplace. This aspect mainly
concentrates on the tickets number that are get by the person from respective organisation.
Cost: It is identified as an amount of capital which obtain in holiday trips financing for
persons. During the planning of tour packages, it is essential to involve this aspect. Respective
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organisation offers different effective packages to person as per their charges and requirements
are definite on that basis.
There are different profits and costs which are determined as below:
Indirect cost: It is a type of cost which is not included to the revenue in a direct way. There are
certain examples of this elements such as rent, expenses and many other. It is highly essential for
the organisation in order to render accurate services to their customers.
Direct cost: This cost is identify as an expenses which is complete on good production. In order
to manage this cost is effective and important for organisation to increase their profit. Buying
ticket and crusis of a travelling places can be included as an appropriate way.
Variable cost: It is a kind of expanses which present the business values in present year. It is not
fixed in each and every situation. One of the best example of this cost is salary which is paid to
workers.
Fixed cost: It is not change in every situation. There are some examples of this cost such as rent,
and many other. It is beneficial for the enterprise to determine their all fixed expanses
effectively.
Importance of costs:
Success and development of business organisation entirely lay on the costs of products
that are receive in financial year. So, it is a vital part that requires to be reasoned by each and
every enterprise (Evans, Stonehouse and Campbell, 2012.). Systematic and accurate planning
decrease the changes of depicts financial condition of firm. In this company use different kind of
strategies to sell a various number of holiday packages and to increase the sales of business.
Cost reduction: It refers to the main element that is always related by all company. In
order to decrease additional cost of enterprise, better and budgeted journey services are offered
by the organisation. Reduction of cost helps in maximising the effectiveness and profitability of
company.
Enhancing business performance: Cost system gives an effective chance to enlarge the
business operations and functions at international level. It also helps manager in improving the
performance level and leads entity towards success and development. It see sustainability of
companies in the competitive marketplace.
Importance of Volume:
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Diseconomies of scale: It is refers to situation in which tour costs are increased with
growing business results. Here, economic scale, it is not attained by organisation. The condition
develops when an entity fails to handle all process effectively. Sometime, maximise in size of
business is the main reason behind scale diseconomies.
BEP Analysis: It is refers to Break-Even Point, it is important and essential tool for the
company in order to determine need to sell, annually or monthly, to cover business costs of doing
all functions and activities (Evans, Stonehouse and Campbell, 2012). It mainly based on variable
and fixed costs per unit of revenue and sales.
Economies of scale: It is defines as the cost advantages that go on with maximise in
output of services or products. In this large number of product production is lower down the
business cost. The main reason behind development and progress of Carnival Corporation & plc
is their emphasis on work efficiency.
Volume and cost in financial management of travel and tourism sector is essential. It
manage to administrator regarding effects and relationship of various factors related with profit.
It helps in evaluating the profitability and performance of company in a proper manner so that
employers acquire accurate plan regarding usage of funds. From the same, contribution margin
size is also very essential elements of cost volume evaluation.
1.2 Different pricing methods used in the travel and tourism sector
Tourism sector is growing speedily in this fast moving world. Large number of persons
are visiting various destinations, travelling all over the globe and are applying internet sites for
making the tour booking. This kind of sector is essential for all the nations because it takes the
fund and the progress to the countries (Henderson, 2010). It is significant and vital to make
accurate decision for the organisation so that business can create enough earnings and can take
effective process in order to expand their business activities in future. For this purpose, company
offered different tour packages that help in effective planning journey. As person are getting
much price sensitive or delicate, they select those services and products from which they obtain
maximum benefits. It beneficial for the enterprise to classify market accurately and analysis the
demands and needs of individual in order to give them proper plan. It is not easy for the Carnival
Corporation and plc to fix proper costs of holiday trip. As per the period and condition, policies
of pricing are changed repetitively. By following proper pricing approach, business entity is
capable to achieve maximum turnover by attracting million clients. Reasonable prices of holiday
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trip assist the organisation in planning attention of various number of audience towards the firm.
Few pricing approaches that are followed in travel and tourism industry are described below:
Seasonal pricing: Each and every business who is launching in travel sector known that
they can not fix same prices and values for entire season. In peak time, which can be summer in
few countries are winter in other. Further they charge maximum amount of money from their
customers because of more demand.
Rack rate: It is also essential type of pricing strategy which is essential and famous in
travel and tourism industry. In this pricing, Carnival Corporation settle office price and value for
their facility, it is not final price because in nature it is negotiable.
Market based pricing method: It is a best approach in which costs of tour are set as per
the situation of marketplace. In this pricing is settled on rivalry and business require to analysis
prices of services and products that are existence in market. In this one of the main and essential
part is competitor's pricing strategies which help company to attract large number of the
customers towards company (Heung, Kucukusta and Song, 2011).
Cost led pricing strategy: It is refers to traditional approach in which net price that is find
in production of particular part. It is essential for the business organisation to achieve long term
benefits and advantages in competitive marketplace. This method includes selling, distribution
and production cost of tour package. This pricing strategy is used by Carnival Corporation & plc
with aim of increasing sales and revenues. They evaluate price that is obtain in cruise journey
and add desired turnover in it, this help in find out the cost which is charged by the company
from clients. P & O (Peninsular and Oriental) Cruises brand of company select this pricing
approach.
Price led costing: Nowadays, business known that clients have more capability to pay. In
this service rate is defined by analysing the amount of price which customers are ready to give. It
is also very essential and beneficial pricing strategy which decided the final cost of holiday trip.
In this respective organisation understand that their customers are willing to any cost of amount
for effective services.
Contribution margin based pricing: It is also essential and beneficial pricing strategy, in
which price are calculated through variable cost. It is identified by funding the margin between
variable cost per unit and fix prices (Nielsen and Spenceley, 2011). In calculation of this price,
fixed cost is totally ignored because it do not modify with the change in the output level.
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1.3 Various Factors influencing profit for travel and tourism businesses
The growth and development of tourism sector is completely relay on its capacity to yield
effectiveness or create maximum sales. It is important for all organisation in order to maximise
its turnover so that they can achieve their long term goals effectively. Carnival Corporation & plc
is a tourism industry that needs more investment of capital to stimulate the preferences of target
customers. But there are various factors which effects on business profitability and performance.
All those factors are describe as below:
Seasonal Variation: It is refers to as a very common factor in tourism industry.
Respective organisation is presently operating in different nations which mainly contains
Germany, Italy, UK, USA etc. As an output, in spring and autumn weather there is reduce in the
measure of potentials clients that finally decrees entire profit of company. But on obstinate, in
peal period of time, referred firm will yield maximum profits.
Political environment: One of the negative effect on different organisation is Brexit that
falls in the tourism industry. Large number proportion of business entity, tourist comes for
Britain mainly (Papatheodorou, Rosselló and Xiao, 2010). With licence of Brexit, VISA process
has been very analysable, as an output travellers require to wait longer period for accomplishing
visa.
Economical Environment: It is also main factor that effects on business performance and
profitability in direct and indirect way. European nation growth rate is less as compared to
another countries. In this person choose to pay their money more on buying commodities that
fulfils various requirements rather than paying on visitors attractions. As an output id directly
effects the profitability and performance of Carnival Corporation & plc.
Social Environment: In United States of America, person are pursuing the trend of
marketing such as they choose to travel over rode journey (Pike, 2012). Changes in the culture
highly impact the profitability and effectiveness of respective organisation positively.
Bad debts: It make negative effects on profitability level of company. Mentioned firm
has an effective system of management accounting which is essential for making receivable
report. When an enterprise doesn't have to carry on with the problems like bed debts issue.
Current Trend: This factor mainly depends on customers purchasing power which is
rapidly increasing. As an output, they can pay maximum on presenting Luxury commodities or
facilities which is beneficial for the company.
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TASK 2
Covered in PPT
TASK 3
3.1 Interpret travel and tourism financial accounts
There are some financial accounts which are describe as below:
Cash-flows statement: It is concerns with financial statements which is important for the
company to identify their cash in internal and external (REPORTS, RESULTS AND
PRESENTATIONS, 2018). It is mainly divided into three parts, first section is operation where
the business cash outflow and inflow are recorded. Another is investments, it is essential because
it includes all information and data concertinaing to investing activities such as buy of fixed
assets (Pocock and Phua, 2011). Last part is financial and accounting activities such as long term
loans.
Trading account: It concerns to the part of income statement which is important for the
business to prepare P&L and Trading account. This aspects gives full detail regarding cost of
goods sold, credit sales and services.
Profit and loss account: It is also an essential part of income statement related to net loss
and profit to the neutral. This data is given for a specific time of accounting and includes various
components such as office rent, salary, legal and office expanse etc.
Balance sheet: This aspects identifies the financial position of business entity for a
specific period. Entire records and information related to company liabilities and assets are
included in this statement.
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