Financial Management, Funding, and Analysis in Tourism Sector Report

This report provides a detailed analysis of finance and funding within the travel and tourism sector, focusing on the financial management of businesses like Carnival Corporation & plc and Dalata Hotel Group plc. The report covers the importance of cost and volume in financial management, analyzes various pricing methods (mark-up, mark-down, cost-plus, and inter-temporal pricing), and examines factors influencing profitability, such as seasonal variations, economic factors, and bad debts. It also includes an interpretation of financial accounts for Dalata Hotel Group plc, comparing performance over two years (2016 and 2015) using profitability, liquidity, efficiency, and solvency ratios. The report explores sources and distribution of funding for capital projects in tourism, offering a comprehensive overview of financial aspects within the industry. The analysis provides insights into how companies manage costs, determine pricing, and maintain financial stability within the dynamic travel and tourism market.

FINANCE AND
FUNDING IN
TRAVEL AND
TOURISM SECTOR
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
P1.1 explaining the importance of cost and volume in financial management of carnival
corporation and plc.................................................................................................................3
P1.2 analysing pricing methods used in the travel and tourism sector. Defining the optimal
strategies with relevant examples from different cruise brands of Carnival Corporation & plc.
................................................................................................................................................4
P1.3 analysing factors that influencing profit for travel and tourism businesses of Carnival5
Corporation & plc cruise brands.............................................................................................5
TASK 2............................................................................................................................................6
TASK 3............................................................................................................................................6
3.1 interpret financial accounts of Dalata Hotel Group plc for the year ended 31st December
2016 showing at least two years’ performance (for example comparing 2016 to 2015).......6
AC. 4.1 Analysing sources and distribution of funding for the development of capital projects
..............................................................................................................................................10
associated with tourism........................................................................................................10
REFERENCES..............................................................................................................................12
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INTRODUCTION
Finance and funding play important role in in tourism and travel industry. Importance of
cost which proceeded into the decision making process. Business use finance information as all
level of operation to understand the effect of costing and help to management in effective
decision making. In the brief of tourism and travel industry the mode of assessment, assessment
criteria after completion of the detail knowledge and the importance of direct, indirect, fixed and
variable cost. Analysing the pricing model which lead to organization in the competition and get
better return on the investment. Finance and funding in the travel and tourism industry with a
causative to addition of knowledge in various concept and aspects related to financial funding.
Financial analysis of company also helps to process of calculating the viability, stability
&profitability.
TASK 1
P1.1 explaining the importance of cost and volume in financial management of carnival
corporation and plc.
Carnival corporation &plc is the among the largest, most profitable and financial strong leisure
travel company in the world. Assets turnover ratio help the organization to indicate how
effectively and efficiently the management use its assets by calculating net sales of the company
and average total sales of the company. By using the inventories turnover ratio company can
determine the deficiencies in the product line, obsolescence’s. For calculating inventories
turnover ratio company annual sales/ inventories cost incurred. All pricing factors are considered
in reference of seasonality, operating cost, competition and demand. The average price the
organization sell product can vary but this all factors are concerned (da Silva Etges and et.al.,
2016). Costing related to tour packages that completely depends upon different tour type and
number of passenger, and number of rooms that company provide to the customers. Fixed cost,
variable cost and annual business cost which determining annual business cost of the company.
Fixed cost for instance rent, equipment and insurance these cost stay the same no matter
company sales are increasing or decreasing (Lopes Miiller and Lopo Martinez, 2016). This type
of cost is sate of nature and company factors can’t influence these cost. For maintaining the
variable cost carnival corporation plc have to determine the operating cost for instance wages,
gas, electricity in the organization. For betterment of financial management company need to
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analyse the distribution network cost and competitive cost against the rivals. Demand from past
and future customers it also worthwhile for target a particular segment.
P1.2 analysing pricing methods used in the travel and tourism sector. Defining the optimal
strategies with relevant examples from different cruise brands of Carnival Corporation &
plc.
Carnival corporation & plc now comprises 10 cruise line brands. Operating a combined of fleet
of over 100 ships. The company’s portfolio of 10
global cruise line brands include Carnival Cruise Line, Fathom, Holland America Line,
Princess Cruises and Seaborne in North America; P&O Cruises (UK) and Cunard in
Southampton, England; AIDA Cruises in Rostock, Germany; Costa Cruises in Genoa,
Italy; and P&O Cruises (Australia) in Sydney. For maintaining the cruise brands of carnival
corporation & plc have to determine the pricing strategies for the betterment maintenance of
different cruise brand.
 Mark up pricing: - These strategies involves setting the price of tour and activities in
order to ensure that company gain profit on each of their operation. for instance, carnival
corporation need to determine each tour of the different cruise brands running and
identify all the cost which are associated with a running tour that concerned with time
spent of developing the tour and resources used in each tour by all cruise brands of the
company (Robinson and et.al., 2016). The overall cost of the business depends upon
which mark up pricing company adopt. For instance, cost of each tour about $500 and
company can accommodate 5 people for every single tour that means in order to earning
a profit organization need to mark up pricing $200 as company profit margin. This
strategy allows high profit per customers, high perceived tour value and extra budget to
upgrade the services of vary brands.
 Mark down pricing: - These strategies involves mark down their prices in order to
competitive in the market and influencing the customers for using the mark down price
because customer and future prospects can attract toward the desirable price. In addition
to this strategies carnival corporation may generates more booking with different brand
line of the company and still remaining competitive position in globally (Roy, 2016). By
adapting these strategies help to allowed more booking without the promotion activity
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that vary brand of the company can generate more profit and earn more income in the
end. This strategy allows attract future prospects and customer in low season by setting
competitive pricing levels.
 Cost plus pricing: - this method is based on the cost for instance total cost of the ship
which are concerning a single tour and total time and resources taken in the single tour.
This method is based upon the total cost (profit) is added to the total cost of the set price.
For calculating the cost plus pricing carnival corporation need to identify the total
expenses incurred in single tour and divided by no. of packages that company have
offering.
 Inter-temporal pricing: - customer’s demands become more inelastic during seasonal
time and departure dates. This pricing allows carnival corporation lines to increase their
fares. Before the departure time of cruise that strategies allowed to increase and cruise
lines try optimizing capacity by reduction in price just before last minutes (Said, 2016).
This strategy occurs in peek season. Reaching max capacity, the critical ratio underscores
the cost of underage and overage.
P1.3 analysing factors that influencing profit for travel and tourism businesses of Carnival
Corporation & plc cruise brands.
1. Seasonal variations: In context of tourism industry seasonal factors plays a major role in the
company profit margin. Seasonality in tourism industry means a temporal imbalance of in the
phenomenon of tourism which are expressed into number of visitors and expenditure of visitors,
transportation modes which directly impacted on the company profitability (Armenski, Dwyer
and Pavluković, 2018). Due to seasonality variations demand of ships and cruise are directly
impacted. During the seasonal variation company gets to offer discounted or mark down pricing
for the customer to reduce the impact of seasonality factor.
2. Economy factor: In duration of economic recession customers will be more careful in the
form of money where they spent. Tourist will also be demoralized when the economic recession
is over. If customer’s have a strong purchasing power and willing to spend their money on
tourism they will get the desired result of the company services and company took advantage the
economic standard of prospects.
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3. Bad debts: - Bad debt shows the excessive side of liabilities as compare to assets side which is
not ideal situations for the organization.
 Assessing customer’s creditworthiness by analysing lower credit limit.
 Making and communicate the clear terms and norms with other party (Camilleri, 2018).
 Carnival corporation & plc have involving the professional advisor for auditing the
financial statements and analytical analysis of costs which incurred in single trip of the
company.
TASK 2
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TASK 3
3.1 interpret financial accounts of Dalata Hotel Group plc for the year ended 31st December 2016
showing at least two years’ performance (for example comparing 2016 to 2015).
Particulars Formula 2016 2015
Profitability ratios
Gross profit margin Gross profit / Net sales * 100 62.20 % 61.50 %
Net profit margin Net profit / Net sales * 100 12.02 % 9.73 %
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Return on capital
employed (ROCE)
Earnings Before Interest Taxes /
Capital employed 0.073 % 0.05 %
Return on Equity Net income / Shareholders' Equity 6.03 % 5.34 %
Liquidity ratios
Current ratio Current assets / Current Liabilities 1.44 : 1 2.84 : 1
Acid Test ratio Liquid assets / Current Liabilities 0.83: 1 2.72 : 1
Efficiency ratios
Receivables Turnover
Net credit sales / Average accounts
receivable 42.04 47.96
Inventory Turnover
Cost of Goods Sold / Average
inventory 69.4 89.5
Creditors' payment period
Total suppliers purchases / Average
accounts payable 42.33 38.58
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Solvency ratios
Gearing ratio Debt / Equity 0.43 0.47
Debt to assets Debt / Assets 0.37 0.37
Profitability ratio: -
11 Gross profit margin: - decrease in cost of goods sold will cause an increase in gross
profit margin. as compare to 2015 gross profit margin was 61.50% and in 2016 the gross
profit increased to 62.20% that shows increase net sales and reduction in direct cost.11 Net profit margin: - in 2015 company net profit margin was 9.73 and in 2016 the net
profit margin increase up-to 12.02% that shows decrease in the cost of overhead (indirect
expenses) of company. Company net profit margin was slight increased up 2.29% of the
company.11 Return on capital employed (ROCE): - increase in return on capital employed shows
maintain and improve in operating profit but reducing in value of capital employed.
Company financial statements shows increase in return on capital employed from
0.05%(2015) to 0.073% the variance between 2015 to 2016 is 0.23%.11 Return on equity: - in company profitability ratio return on equity shows slight
change between year 2015 to 2016 the shareholders’ investment gets better return in
comparison 2015 (5.34%) to 2016(6.03%). a rising return on investment shows company
ability to increasing profit.
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Liquidity ratio
1. Current ratio: - in financial statements of company the current ratio decreased from 2015
(2.84:1) to 2016 (1.44:1). that may cause by problem with inventories management,
inefficiencies lax standard for collecting receivables. This is not ideal situation for the company.
2. Acid test ratio: - in analysis of liquidity ratio company found there is decreasing rate in acid
test ratio which stats the over leveraged position, struggling to maintain or grow sales. Company
acid test ratio decreased from 2015 as 2.72:1 to 2016 as 0.83:1 which stats the paying bill too
quickly or collecting receivable too slowly. The ideal ratio of acid test of greater than 1.0 that are
able to meet their short term needs (Divisekera and Nguyen, 2018).
Efficiency Ratio
1.Receivable turnover: - in the financial statements the receivable turnover ratio decreasing as
compare to previous year. The downfall of the receivable turnover is 5.92% which may be
caused by company is facing more delinquent client. For increasing that ratio company need to re
evaluate credit policies.
2. Inventory turnover: - in efficiency ratio of the company there is downfall in inventory turnover
ratio that is in 2015 the company inventory turnover ratio was 89.5 and comparing to 2016 the
inventory turnover ratio was 69.4 which stats the downfall that can be caused by holding
inventories longer than previous measured time periods (Chung and Jung, 2016).
3. Creditors payment period: - These ratio stats the indicate the time (in days) during which
remains current liabilities outstanding. In analysing of solvency ratio of the company creditor
payment period Is increase from 38 days (2015) to 42 days (2016).
Solvency ratio
1. Gearing ratio: - after analysing the debt and equity of the company found out there is slight
downfall as 0.04% in the company from 2015 to 2016. lower gearing ratio means greater
financial stability.
2. Debt to assets: - after analysing the financial statements of 2015 to 2016 there is no change is
debt to assets ratio same as 37%. a lower ratio signals lower percentage of debt; the debt is only
50% of total assets.
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AC. 4.1 Analysing sources and distribution of funding for the development of capital projects
associated with tourism
11 Cross railways
projects-: over 60%
cross-rails funding
come from London.
The overall £14.8
billion funding envelop
for the project. There
are also typical sources
of funding for instance:
- 1. Retained earnings
cash (cash available
after operating
expenses, debt
services.) 2. Equity
(Share issue, private
equity) 3. Debt (loan,
bond, debenture,
equipment trust
certificates, capital
leasing operation
leasing, operations
issues and lines of
credit)11 Multilateral and
bilateral sources of
funding: - this
institution provides
finance for the tourism
development and
detailed information on
37 institutions.
Including the available
of funding and terms
and condition of each
organization.
Multilateral institutions
are term as a global or
regional basis and
bilateral institution is
listed by country to
country.11 Government: -
government take
interest in part of
developing tourism
associated project.
Government can
generate revenues by
developing tourist
information point,
small-scale tourist
environmental project.
Ministry of tourism
does not provide
funds but it has a
tourist demand
scheme that helps to
investing in
infrastructure.11 Private funding: - for
instance- 1. Seed
capital (cash come
from family member’s
other external
individuals) 2.
Venture capital 3.
Private equity 4.
Angel investor 5.
Loan from financial
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institutions and non-
banking financial
institutions. 6. leasing
IDA AND IFC:-
international
development
association and
international financial
corporation provides
grant to capital related
project associated
with tourism.
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REFERENCES
Books and Journals
Armenski, T., Dwyer, L. and Pavluković, V., 2018. Destination competitiveness: Public and
private sector tourism management in Serbia. Journal of Travel Research. 57(3). pp.384-398.
Camilleri, M.A., 2018. Nurturing travel and tourism enterprises for economic growth and
competitiveness. Tourism and Hospitality Research. 18(1). pp.123-127.
Chung, H. and Jung, W. O., 2016. Financial Disclosure Incentives and Organizational Form
Changes. Asia
‐Pacific Journal of Financial Studies. 45(6). pp.839-863.
da Silva Etges, A.P.B. And et.al., 2016. USING COST-VOLUME-PROFIT TO ANALYSE
THE VIABILITY OF IMPLEMENTING A NEW DISTRIBUTION CENTER. Brazilian
Journal of Operations & Production Management. 13(1). pp.44-50.
Divisekera, S. and Nguyen, V.K., 2018. Determinants of innovation in tourism evidence from
Australia. Tourism Management. 67. pp.157-167.
Lopes Miiller, D. and Lopo Martinez, A., 2016. BOOK-TAX DIFFERENCE, EARNINGS
MANAGEMENT AND BOND RATINGS IN THE BRAZILIAN MARKET. Revista
Universo Contábil. 12(3).
Robinson, P. and et.al., 2016. Operations management in the travel industry. CABI.
Roy, C., 2016. Financial Reporting Irregularities in Indian Public Sector Units: An Analysis of
Current Practices. Browser Download This Paper.
Said, H. A., 2016. Using Different Probability Distributions for Managerial Accounting
Technique: The Cost-Volume-Profit Analysis. Journal of Business and Accounting. 9(1). p.3.
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