Finance and Funding Strategies in the Travel and Tourism Sector Report

This report provides a comprehensive analysis of financial management within the travel and tourism sector, focusing on the significance of cost and volume, pricing methods, and factors influencing profitability. The report examines the operational and financial strategies of companies like Carnival Corporation & Plc and Dalata Hotel Group, delving into direct and indirect costs, variable and fixed costs, and economies of scale. It analyzes various pricing methods, including cost-led, price-led, seasonal, and market-based pricing, and their impact on revenue generation. Furthermore, the report explores factors affecting profitability, such as seasonal variations, political and economic environments, social trends, and the management of bad debts. Finally, the report discusses the interpretation of financial accounts, including cash flow statements and trading accounts, to aid in effective decision-making within the travel and tourism industry.

Finance and Funding in the
Travel and Tourism Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of cost and volume in travel and tourism sector..........................................1
1.2 Analyse of pricing methods used in travel and tourism sector.........................................2
1.3 Analysis of different factors which influence profitability of travel and tourism..........3
TASK 2............................................................................................................................................5
TASK 3............................................................................................................................................5
3.1 Interpretation of financial accounts to assist decision-making.........................................5
TASK 4..........................................................................................................................................13
CONCLUSION .............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
In a business process, managing financial resources are highly essential. Better
and effective services are being provided to the customers and if they fail to manage the
monetary resources in effective manner then they have to face many kind of obstacles. In past
few decades, travel and tourism sector is being growing on a rapid speed. High revenue is being
earned by most of the companies (Buhalis and Darcy, 2011). This has been done by focusing on
two areas which is being reduced by cost of business and second one is enhancement in sales by
expansion of company. Company chosen for this report are two various companies which are
Carnival Corporation & Plc. And Dalata Hotel Group and they both mainly deals in travelling
and tourism industry. There are various things which will be discussed in this report are like
determination of various types of pricing strategies which are being used by tourism sector which
can affect the profit ratios of company. Besides this, utilisation of managing accounting data as a
method of making decision which shall be discussed in this report.
TASK 1
1.1 Significance of cost and volume in travel and tourism sector
There are many parts in tourism industry and they all are significant factors along with
playing crucial role. Operations are being conducted by Carnival Corporation and Plc across the
globe and thus they have now cruise brand here they are able to hold the position biggest luxury
within world. Explanation of various costs and profits are being described below:
Indirect cost: There are various activities conducted for generating revenue but these kind of
expenses are not included in this. This is considered as highly essential for this kind of
expenditure as not being same, better facilities can be provided to the clients.
Direct cost: There are certain expenses which are being done while manufacturing of products
and services. It is crucial to manage this kind of cost so that profit can be in better manner.
Purchasing of cruise tickets for travelling into destination which can be stated as example of
direct expenditure in travel and tourism sector (Choi and Turk, 2011).
Variable cost: Fluctuation is being observed every year. There are unstable in nature and thus
can be high or low in every year. Example can be said of salaries which are being salaried to
worker in Carnival Corporation & Plc. And that is example of this expenditure.
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Rigid cost: Fixed cost is something which remains constant even if any other cost fluctuates, it
does not affect this kind of cost. Rent paid by the company can be said as an example of fixed
cost.
Allocation and distribution: Overhead can be stated as expenditure who are not related to direct
labour or material. Numerous kind of approaches which are being utilised for allocation of costs.
Allocation of fixed cost are not done to all produced unit but later on allocation is being done to
each and every item which are being manufactured.
Break even analysis: The make back the initial investment investigation gives you a chance to
figure out what you have to offer, month to month or yearly, to take care of your expenses of
working together—your equal the initial investment point. The equal the initial investment
examination table ascertains an earn back the original investment point in view of settled costs,
variable expenses per unit of offers, and income per unit of offers.
Economies of scale: When the output is being enhanced, then production cost is being reduced
like allocation of fixed cost in more units. This can be stated as name of economics of sale. The
main cause behind success is Carnival Corporation and they mainly focus on enhancing the
outcomes so overall business cost can be reduced (Evans, Stonehouse and Campbell, 2012).
Diseconomies of scale: The relation of this kind of term is propelled to rise in marginal costing
where the enhancement of yield is being done. Mainly this kind of issues originate when the
director of large sector like Carnival Corporation neglect to regulate their work in an effectual
manner. For instance: Two separate activities which are being participating in cruise trip and
even institution reduced the rate of certain activity then they need to bring the pace later on.
1.2 Analyse of pricing methods used in travel and tourism sector
It is very hard to set proper price for a product in numerous companies. Sometimes,
company thinks that they can increase selling price for same services while some of them mainly
faces losses due to thinking of customer that prices are much more higher then the expected
level. By utilising following pricing methods, high revenue can be earned by company and
number of permanent clients:
Cost led pricing: This can be stated as traditional concept where the total cost is being calculated
for manufacturing of products and services and thus after that profit percentage is being added in
that for final price. This kind of methodology is being utilised for analysing the cost which are
being incurred in cruise trip so that certain prices can be charged from customers.
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Price led costing: Purchasing power of customers have been enhanced in present scenario. Rate
of services are being evaluated which are being paid by the customers. There are some clients of
Carnival Corporation who have better purchasable power to avail the best facilities (Evans,
Stonehouse and Campbell, 2012). They mainly find out the sum of money which a wealthy client
can give and then company calculates the price which will incur for desired services. This kind
of method is being utilised for the brand of given company along with another one which is
Holland America.
Seasonal pricing: Companies who are dealing in travelling and touristy sector know whcih they
need to change the prices as per the seasons. There are some certain peak seasons like for some
nations is summer and for some winter is the season due to high demand. But in off season,
prices are kept low as there are less customers who avail the services.
Rack rate: This kind of rating is highly famous in tourisms department. In this kind of pricing,
Carnival Corporation company decides offer cost for the services as this not the last rate as it is
flexible.
Contribution margin based pricing: In this sort of element, variable cost is being determined by
cost. There is the distinction which should be discover among the contrast between set costs
alongside factor cost and therefore by this Edge is being set. There is the settled cost which is
being disregarded.
Market based pricing: This can be stated as other part of the pricing related to the other
competition based. There are services for whom prices are being set and that prices are being set
by rate of facility which is present within marketplace. Essential part of the company is
competitors pricing strategy (Henderson, 2010).
Last minute pricing: This kind of rating is being utilised for selling out the stock existing in last
time. This is mainly finished with the motive of filling gaps and prices on regularly basis.
Normally Carnival corporation & plc use this method at the time of peak season. This is being
utilised by at the time of peak season by Carnival Corporation & plc.
1.3 Analysis of different factors which influence profitability of travel and tourism
The main influence in tourism sector is of time period, net income of Carnival
Corporation & Plc. Can be much more in an quarter and thus it can go seriously down in other
due to off season. There are some elements which as direct impact on the profit like Political
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support, health of economy, social culture and many others. Below is the detailed explanation of
these factors:
 Seasonal variation: There is no argument regrading significance of season in tourism
sector (REPORTS, RESULTS AND PRESENTATIONS. 2018). This company is present in
many nations liken UK, USA, German, Italy and many more and there is high demand of
cruise specially due to changing season like somewhere it can winter and some where it
can be summer. This states that in off season Carnival corporation & plc will not have
desirable figure of customers and thus their profit will reduced. But in the peak season
income will be at high and thus there will be more net income earned. Profitability ratios
of the mentioned company does not fluctuate as there areas of operations are large in
nature.
 Political environment: There has been negative impact on the ratios of profit by Brexit
specially to companies dealing within travel and torus sector. Certain amount of revenue
which will be generated by carnival corporations which mainly comes from Britain.
There is the restrictions within political factor specially while making long term policies
along with profit hindering. (Heung, Kucukusta and Song, 2011).
 Economic environment: The financial development of European country is moderate in
nature. The diagram of aggregate requests in these countries are going down and
individuals predominantly are spending their cash on required products. This sort of
factor has negative effect on the development of organization and benefit is being
affected in a horrible way. On the off chance that Carnival organization and plc would
have working in Asian reason that they could take the advantage of high monetary
development.
 Social environment: Civilization which is existing in an economy of country has the
potential to impact business in successful manner. In USA, there is change in market
trend and instead of going on road trip, family is preferring for cruise trip on ships. This
kind of alteration in culture made an optimistic impact on the net profit of mentioned
project and they have attained large amount of profit (Spencer and Zembani, 2011).
 Current trend: There has been increment in millionaire and billionaire people. This in turn
has created the supply of luxury services like Cruise trip and or renting their own cruise.
Earlier there was perception that cruise is only meant for high class people but in current
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situation trend of market has stated that even middle class has starting to opt for cruise
trip.
 Bad debts: It is obvious that bad debts mainly create negative impact on profitability. But
as per mentioned company save themselves from thus kind of problems as they have
effective management accounting system along with making of account of receivable
report (Nielsen, and Spenceley, 2011). When an organisation do not have to cope up with
the issues like bad debts then they key brand like Fathom register more profit.
TASK 2
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