Pearson BTEC HND Travel and Tourism Finance and Funding Report

This report provides a detailed analysis of finance and funding within the travel and tourism sector. It begins with an introduction to financial concepts and their importance in the industry, followed by an examination of cost, volume, and profit relationships, and the analysis of various pricing methods. The report also explores management information systems used in the tourism sector and their application in decision-making. It includes an interpretation of financial accounts to aid decision-making and concludes with an overview of the sources and distribution of funding for both public and private tourism development. The report emphasizes the importance of financial planning and analysis for the success of travel and tourism businesses, considering both micro and macro-level financial factors.

FINANCE AND FUNDING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1: Importance of Cost, Volume and profit in relation to travel and tourism.......................1
1.2 Analysing pricing method used in travel and tourism sector...........................................3
1.3 Analysis of various factors those are influence profitability of travel and tourism........4
TASK 2............................................................................................................................................6
2.1 Different type of management information that are used in tourism sector.....................6
2.2 Use of management accounting information as a decision-making tool..........................7
TASK 3............................................................................................................................................9
3.1: Interpret financial accounts to assist decision-making....................................................9
........................................................................................................................................................10
TASK 4..........................................................................................................................................12
4.1: Sources and distribution of findings for public and private tourism development ......12
........................................................................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Finance is the most important aspect of any business sector to operate its daily
operations. Proper funding of financial should make business more profitable and guide them to
reach its set target. As the main objective of this project report is to acquire knowledge, skills
and method that would help in taking effective decision regarding success of plan. The Project
advantages of cost, volume and revenue for management decision making in field of travel and
tourism industry to know and analyse skill require to realize financial data.
Most of the project talks about financial factors related with micro level as well as macro
level in context to travel and tourism. Various sources of funding available to this particular
sectors are being also explained (Papatheodorou, Rosselló and Xiao, 2010). As a supervisory
authority in travel and tourism a deep study about financial system and related practices are
understand properly. All financial record interpretation is being done to take more effective
decision regarding enhancing stability and performance in comparison to other travel and
tourism company. On the basis of proper analysis various recommendation are being provided
and by using those changes it will help them to achieve its aims and objectives.
TASK 1
1.1: Importance of Cost, Volume and profit in relation to travel and tourism
In any business cost play a important role in increasing profitability of company. It is that
financial value which is spent in order to produce any goods and services but in case of tourism
sector cost which is incurred during delivering service to its customers and promotion of tourism
sectors. It is classified into various cost:
Indirect cost: these are said to be that cost which are indirectly related with the
production process. Like Material and labour (Ritchie and et. al., 2010). It is important for the
company as to estimate its extra cost and labour required in delivering customer services as to
minimise losses.
Direct cost: These are those cost which are directly affecting manufacturing of goods and
services. Importance of direct cost are most helpful in operational planning of tourism sectors as
what is to be best master budget plan for next coming year as to achieve more profit. It will also
help in taken most appropriate decision regarding control of cost system.
Volume is the capacity of magnitude enclosed by a sealed surface.
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Variable cost: these are those cost which are varies according to the change in extra units in
production of goods. As In Merlin entertainment Plc is more focused on creating unique and
memorable visitors experiences with its passion (Spenceley, 2012).
Fixed cost: It is that cost which remain constant whether there is change in production units or
any thing.
Allocation of overheads costs are use as measure as long as applied across reporting periods.
Direct labour charged against a product and total time taken by the machines during production
process.
Cost-volume profit: It refer to be the important tools that provide helpful information for
management in planning and making appropriate decision-making. Income of a travel and
tourism are the outcome of interaction of so many factors. Like selling price and volume of sales,
total fixed cost. CVP is a specific examination the relationships between selling price, total sales
profit. It play important role by providing appropriate management information regarding
financial requirement if a specified level of activity are effecting the selling price and other
variables. Cost volume analysis is a social control accounting techniques that are used to analyse
alteration in cost and sales volume how they affect changes in Merlin Entertainment Plc
profitability. This techniques is widely used in travel and tourism industry and has so many
advantages (Henderson, 2010). It help the Merlin Plc is to determine their contribution margin
that is come out as sales revenues after deducting all variable expenses. Remaining amount is
covered as fixed cost and remains subsequently is said to be profit for the company.
Importance of CVP analysis:
It provide a proper insight into the effects and inter-relationship of various factors that are related
with profit of Merlin Entertainment Plc. It shows dealings cost, volume and profit structure of an
enterprise.
Another importance is to analysed the profitability of the company in right manner so that proper
idea about use of finance in company are using in proper manner.
It is a way to change profit in order to increase the total contribution margin by reducing fixed
cost and by increasing volume capacity.
The size of contribution margin is most important aspect if contribution rate is more it means
company need to spend more on it sales.
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1.2 Analysing pricing method used in travel and tourism sector.
Identify pricing for travel and tourism sectors are every identical because of different
location and also because of people and other components. It diverse price strategies can involve
as tourism business development as a brand and market share. There are various component of
pricing that are being followed as underneath:
 Rack rates: In tourism industry there is having a rack rate which is known as full rate
and is used before any kind of discount is bing applied and provided to wholesalers (Pike,
2012). Those activity and attraction businessman are most likely to be changed all the
time without any day to day discounting.
 Seasonal pricing: Combination of pricing in complete year to minimise low, high season
a standard way for tourism sectors to captured as differing levels of demand because of
time allowed during the year. In every year it will be the same but it have the option to
apply these on vacation and local event. It consist of:
 Summer pricing: In the summer the demand is more because of which merlin
entertainment is trying to raise the price.
 Winter pricing: Under this price is low because of low demand because of this
customers are less and they are try to visit less.
 Cost plus pricing strategies: It is that cost method which is used to set price of goods
and services. Under this method direct cost of material and labour are added to the
markup percentage in relation to decide the price of the products.
 Cost led pricing: Under this pricing method price of customer is said to be willingness to
pay determine those costs, opening with product design and closing with service provided
cost by the company.
 Market based pricing: Under his pricing is decided according to the product demanded
by the customers and them asked the company to develop that products. It is mostly
based on market research. According to demand in market the competitor are use to set
the prices accordingly so merlin entertainment plc is to cop up with that market situation
pricing.
 Last minute pricing: It is said to common betterment to suppliers to fill last time gaps in
stock availability. In other words it is said to be daily pricing that are varies according to
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forward booking and increase last minute booking sites (Wong, Mistilis and Dwyer,
2011). Some common pricing types are:
Per person pricing: It is based on a fixed price per person like adult and children price
concessions. It is mostly used as activity/ attraction and transport operators and camp sites.
Per unit price: It is said to be one unit of product price. It is the price per night which is
related with price accommodation.
 Absorption pricing: It those pricing methods which included variable cost property as
well as a little bit proportion of fixed assets. Under this all cost are absorbed as cost that
are determined as final price of product and services.
 Marginal pricing: It is said to be that price of a services those are equal to as extra cost
of producing an extra unit of results. Under this for using extra service of in relation to
tourism industry are said to be cost of marginal pricing (Nielsen and Spenceley, 2011).
 Return on investment pricing: It is said to be target return pricing methods those are
used by market analyser or sole traders. Rate of return investment objective is to decided
as 5% of investment capital or with 10% of sales management decided as estimation of
20% return on investment.
By using all pricing method those are associated with travel and tourism in proper
manner so that company would plan its target to attract more and more customer toward their
own businesses and help their target to achieve its objectives.
1.3 Analysis of various factors those are influence profitability of travel and tourism
The development of travel and tourism businesses are more depend upon on its ability to
earn maximum profit. Earning profit is to important for company to because profitability impacts
whether company is able to finance fund from banks to attract more investors to finance its
activities and to expand its businesses. Without a profit a company can not operate so owner of
tourism business must understand its importance in future context. There are several benefits of
making a profitability:
 Business Expansion: For expanding business a company need to use important decision
making. Earning a profit will help the company to open up a new location and to acquire
a another sectors and help to target another market to establish healthy strong base.
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 Ability to borrow money: Most of travel and tourist sectors are rely on the debt financing.
It help to repay money that are borrowed to the creditors with interest charged on it. It
mainly included lending of money from a bank (vonder, Weppen and Cochrane, 2012).
 To attract more investor: Top secure funds for business they need to bring more private
investors those are engaged in operations of business. Attracting more investor will
increase the profitability of the tourism sectors.
Factors affecting profitability of travel and tourism sectors are:
 Seasonal variations: In time series analysis it is most important element of forecasting in
which production and strategies of plan are changes according to seasonal trends on that
basis of its features and characteristics (Evans, Stonehouse and Campbell, 2012). Under
this according to the season time of festivals travel agencies are planning to offer so
many plan in relation to earn maximum profit. It affect because of the demand in summer
are more as compare to winter so merlin plc is providing facilities accordingly.
 Political environment: It can either increase or decrease a country attractiveness in
context of tourism sectors. If country thinks as unsafe before any changes and making
changes can increase stability, at that point of time country can very slowly recover to
natural state of tourism. For sustainability tourism development there are so many studies
those are said to be exchange process in between residents and tourism.
 Economic environment: There are various impact of tourism has on environment and
communities those are involve comparatively new. It is a positive, contributing to
employment and social stability. It increase high living cost within community and
different locations were more customer are visiting. Marline entertainment is giving more
profit in order to fulfil economy growth because travel and tourism are growing at a
faster rates.
 Social environment: It is based on design to inform and increase socio-cultural a
appreciation by international tourism. It enables them to use regular tools to expand and
measure fundamental aspects of the economy. It is base on economists to analyse certain
condition of aspects and compare their pertinence to increase growth of the economy.
Marline is using social media to promote development among society because in now a
days they are more in touched with internet and other sources that will attract more
customers.
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 Current trends: As tour operator there are various recent trends in every day. It is
responsible for more young travellers, or foodies those are enjoying moment in daily
business. Under this worth of knowing as well as to adapt our businesses activities to use
more advantage of them. There are certain aspects which are to be followed in current
situation are continuous strength of market is increasing at faster growing source.
Discovering of untouched and unique places to create more opportunities in tourism
sectors. Marline entrainment plc is offering various schemes in order to attract more
customer.
TASK 2
2.1 Different type of management information that are used in tourism sector
Management accounting information is related to the internal managers and decision
makers. It is a management tool which help in taking correct business decisions in appropriate
time (Heung, Kucukusta and Song, 2011). It make proper reports and accounts which show
accurate information in organization. The manager of Merlin Entertainment Plc use this
information to make best policies for the company to attain best result.
There are different types of management accounting information of Merlin Entertainment Plc:
Budget report- Budget is essential tool which used by the management of the company
to control the production cost. In Merlin Entertainment Plc the budget report is a effective tool to
increase the performance of the organization in appropriate manner (Tribe, 2015). In Merlin
entertainment plc would required to prepare cash budget and operational budget as their internal
report to show actual information that can helps in taking correct action regarding business
performance.
Financial statement- It is also a tool which is used by the manager of the Merlin
Entertainment Plc to take abreast decision. Management accounting define financial statement
which analysis financial performance of company. The manager analysis whole financial
information to evaluate best decision regarding their business performance in appropriate
manner. Manager can utilize financial information at the time of making key decisions like
future investment etc. Financial statement measure company performance and helps in
calculating profit and loss of business activities.
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Variance analysis- Management of Merlin Entertainment Plc involve variance analysis
to evaluate the difference in actual and planned behaviour in an organization. It is an important
process to maintain business activities at a marketplace. This analysis is based in the
performance level of financial activities in business. It is measure while preparing future budget
in Merlin Entertainment Plc.
Forecasts- In Merlin Entertainment Plc the forecasting process is based on the vision and
objectives of the company. It can define future need of the particular product and service which
is based on the past data of company. Basically it is a planning tools that is related to the
assumption. It is also a decision making tools which helps is planning, budgeting and future
growth. In Merlin Entertainment Plc can use forecasting at the time of allotment of budget so
they can find right amount of money that should be given to a department. It will helps in
anticipating expenses that company will be doing in future (Vanhove, 2011).
Management Information System- It is a effective tool which focus on business process
and information technology. In Merlin Entertainment Plc the main objective of Management
information system to provide feedback which define the company performance that is analysis
by the top level of management in a company. It play important role in organization to generate
information regarding Merlin Entertainment. Management information system is essential to the
manager to take decision in appropriate manner.
It can collect every type of information which affect the management of the company and
it is also beneficial for employees to perform their job in effective manner. It is a computer based
system which support critical enterprise application. Management information system helps in
achieving goals and objectives in appropriate manner. It include some types which used in
enhance the competitive advantage like accounting, financial, manufacturing, marketing and
human management information system to develop business activities in best way (Morrison,
2013).
2.2 Use of management accounting information as a decision-making tool
Management accounting information is important process which provide data which is
related to the business performance. It improve decision making process in long time of period to
attain success. This information is important in decision making process which include Relevant
cost analysis, activity based costing techniques, make or buy analysis and utilizing the data.
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There are some use of management accounting information which is related to decision making
tool for Merlin Entertainment:
Comparison with the trend- Merlin Entertainment Plc determine the trends by matching
performance of different years, it helps in making future decisions and plans relating to those
trends.
Forecasting sales- Manager of Merlin Entertainment define upcoming request of the
product of the customers which is based on the previous information. In an organization
forecasting sales related to the vision and objectives of the company to attain business goals in
effective manner.
New product and service- Accounting management system used by the manager of the
Merlin Entertainment company which can helps in taking effective information regarding the
new product and service. It can be offer to customers to get higher satisfaction. Manager analysis
the recent structure to define new product and service of the company in appropriate manner.
Merlin Entertainment Plc introduce new products and servile to their client to attain higher
satisfaction by them and attain success in marketplace (Song andLin, 2010).
Produce best product is essential to business growth and also increase their profitability
level in appropriate manner. Every company wants to grow their activates in market and
customers mind, they can able to produce successful products to their clients. Merlin
Entertainment develop their business process through development of products and service to
achieve goals and objectives in effective manner.
Investment decision- Merlin Entertainment Plc must take decision about the areas where
they will invest in future. With the help of accounting information the manager of Merlin
Entertainment define estimation of cost which is related to return and new investment in their
business organization (Murphy, 2013).
Raising capital- Merlin Entertainment Plc can raise their capital with the help of selling
their sales in a market to get return. In organization there are some ways to raise capital through
personal capital, private investors, venture capital, public capital and loans. There are various
source by using it company can raise its capital like internal and external source. The most
important source is internal because it is more reliable for the company as funds are invested as a
own in their business and profit is being distributed among its internal development of the
company.
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TASK 3
3.1: Interpret financial accounts to assist decision-making
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Cash Flow statements:
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