Financial Analysis: Funding & Growth in the Tourism Industry

This report provides a detailed analysis of finance and funding within the travel and tourism sector, focusing on Carnival Corporation Plc as a case study. It examines the importance of cost and volume in financial management, differentiating between direct, indirect, variable, and fixed costs, as well as allocation and apportionment of overheads. The report discusses pricing methods used in the travel and tourism sector, including seasonal pricing, rack rates, last-minute costing, and cost-led pricing, further exploring market-oriented and cost-oriented approaches. Factors influencing profit, such as seasonality, events, government policies, currency rates, terrorism, and natural calamities, are also assessed. Additionally, the study delves into various types of management information applied in the sector, the use of management accounting information for decision-making, and an overview of travel and tourism financial statements. Finally, it investigates the sources and distribution of funding for growth in capital projects associated with tourism.

FINANCE
AND
FUNDING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1 ...........................................................................................................................................1
1.1Importance of cost and volume in financial management of travel and tourism .............1
1.2 Pricing method that are used in travel and tourism sector................................................3
1.3 Factors influencing profit for travel and tourism ...........................................................4
TASK 2 ...........................................................................................................................................5
2.1 Various type of management information that are applied in the travel and tourism sector.
................................................................................................................................................5
2.2Use of management accounting information as a decision-making tool...........................7
TASK 3 ...........................................................................................................................................8
3.1 Travel and tourism financial statement............................................................................8
TASK 4 .........................................................................................................................................10
4.1 Sources and distribution of funding for growth of capital projects associated with tourism
..............................................................................................................................................10
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance and funding can be considered as a vast concept which plays an effective role
in creating effective decision as to carry out the business and its activities in effective and
efficient manner (Buhalis and Darcy, 2011). It is a fundamental concept that helps in evaluating
a significant amount in which organisation can invest in the growth and development of
economy. Carnival Corporation Plc is a chosen company for this particular report, it is the
world’s largest leisure travel and tourism company and deals in high quality goods and services.
This report contents the study about the importance of cost and volume in financial management
of travel and tourism organisation. Various pricing method that are used in travel and tourism
sector and factors that influencing profit and tourism organisation, different type f management
accounting information which could be used in travel and tourism sector, various sources and
distribution of Funding for the development of capital in tourism sector will also be discussed in
detailed manner.
TASK 1
1.1Importance of cost and volume in financial management of travel and tourism
As a large business organisation Carnival Corporation Plc is focused on satisfying the
needs and wants of targeted customers as to sustain them for long time (Papatheodorou,
Rosselló and Xiao, 2010). The company is having high brand image and a big portfolio of a
cruise brand in the country of Australia, Europe and North America. In this competitive era each
small as well as large business organisation are concern on effectively managing financial
resources as to attaining long term benefits and profit for firm. Tourism industry is categorized
among various sectors such as tour operators, hotel, good, beverage, transportation etc. as a
popular business organization Carnival Corporation Plc conduct their business operations in
different nation as to explore their business activities and attain high growth and success. For this
company need various cost and profits which are explained as below: Indirect Cost: These are called as the cost which is indirectly incurred in production
process of any products and services that create value for company’s profit. These sorts
of costs are not easily associated with the income age exercises (Choi and Turk, 2011).
Its cases are organization costs, lease, and so forth. This significance of this sort of use is
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high in light of the fact that without same, an association can give better offices to their
customers. Direct Cost: This can be considered as an essential cost which has a direct influence on
production unit of any business firm which helps in creating highly effective goods and
services (Ritchie, Amaya Molinar and Frechtling, 2010). Dealing with this cost in a
successful manner is pivotal for growing the benefit of association. Purchasing journey or
ticket of a tripping goal can be considered as the most proper case of direct use in
movement and tourism segment. Variable Cost: This is also another essential part of finance that plays a vast role in
creating effective decision that are related with financial resource of firm. These kind of
expenses are changed at continuous basis. These can be less in the current year but it does
not mean that, these will not enhance in the upcoming year (Evans, Stonehouse and
Campbell, 2012). This cost influenced through the change arises in output. Salary of
employees who are working in Carnival Corporation Plc is an effective example of such
type of cost which are incurred as to satisfying the needs and wants of workers. Fixed Cost: There is not any kind of change arises in this type of cost through any kind
of alteration arises in the output and input of firm or its various operations. This can be
described as an important part of financial resources which are needs to be fixed by firm
as to attain high growth, companies rent can be considered as an effective example of this
cost as organization needs to pay this fixed amount whether they conduct their operations
at wide area or not. Allocation and apportionment: Overheads can be considered as expenses of firm that are
not related with direct material or labour. There are different methodologies of allocation
of expenses. It should be possible by utilizing minor or assimilation costing. In earlier
one, the settled overheads are not assigning to each delivered unit, but rather later
distribution of this cost to every last thing which is created by organization. Break Even Analysis: This is evaluated as an effective part of financial management and
also concern on analysing the exact amount of unit which needs to be sold a by firm. This
can be generated at monthly, yearly and quarterly basis (Song and Lin, 2010). Economies of scale: The primary explanation for achievement of Carnival Corporation
Plc is that is they are centred on ceaselessly improving their outcomes with the goal that
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their general business cost will go down (Gibson, Kaplanidou and Kang, 2012). At the
point when an association expands their yield, the cost of generation diminishes because
of different components like designation of settled cost in more units. This idea is known
by the name of economies of scale.
 Diseconomies of scale: This is a wide concept which is widely interlinked with the
enhancement in marginal cost while the output increases. Suck kind of conflict arises
when higher authority and manager of a firm like Carnival Corporation Plc are not able to
effective manage their workforce.
1.2 Pricing method that are used in travel and tourism sector.
As a popular business firm Carnival Corporation Plc is concern on providing variety of
tour packages to their significant customers as to sustaining them for long time. There are
different methods that are used by travel and tourism sector as to setting up the prices of products
and services in order to attracting large number of buyers, some essential methods are evaluated
as below:
Seasonal Pricing: This described as the most effective method of pricing which is based on
different season in which people are very much interested to visit various places. In a year there
are various seasons in respect to evaluate the visit of visitors (Gibson, Kaplanidou and Kang,
2012). These type of packages and its rates are based on the need and demand of customers that
consist from the trip of various seasons.
Rack Rates: In this method fixed price is charged from the customers and not any kind of offers
and discounts are provided to the consumers. These rates are regulars in the whole year and not
any kind of changes are made in the prices of packages. These type of rates are mentioned in the
brochures of company.
Last Minute Costing: This describes as routine prices and in this changes are arising as per the
booking and reservation of tickets and packages that are taken by the buyers and the prices are
enhance at the last minute of booking. It plays a vast role in bridging the gap among the different
needs and requirements of customers.
Cost led pricing: In this method selling price is calculated through applying total cost of
production and the cost which is incurred in the production of product. In this information is
given to as to establishing relation to the sales that can be further compare which assist to the
appropriate pricing of product.
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Example of different business that are related with travelling industry:
In the recent trend travel and tourism consist as the most growing sector and contributes a
huge among in growth and success of country and its economy. Carnival Corporation Plc
operates its business operations in different geographical areas such as Australia, North America
and Europe and company is focused on selecting a dynamic method of pricing as to attaining
high growth and profit at market place (Henderson, 2010). Mostly companies in travel and
tourism apply multiple methods of pricing in which seasonal method of pricing is more effective.
Some essential method of pricing is associated as below:
Market oriented method: In travel and tourism sector there is high competition available at
market place and the prices of goods and services are based on market price of products. This is
most effective method which is applied by firm as to sustaining high position at market through
serving variety of goods and services in affordable prices which are less as compared to their
competitors.
Cost Oriented Method: This also another effective method of pricing and in this total margin of
product in mixed in the selling prices and it helps in generating high profit and revenue through
conducting business and its operations at large scale. This is most appropriate method for setting
up prices of products and different packages that are offered to their significant buyers
(Spenceley, 2012).
1.3 Factors influencing profit for travel and tourism
There are various factors by which travel and tourism industries implement their
strategies for making profits to the company. Managers of the travel and tourism company
launch new and innovative scheme for the customers, they aware them about the attractive
travelling package for them according to the event, season, festive time, they implement their
proper planning and mange to execute their plan in effective manner. Manager should manage all
activities and also involve their staff for promotion and advertisement of various tour package,
manager should implement should use innovative trend of advertisement so that it is helpful to
attract the customers (Heung Kucukusta and Song, 2011). In present scenario it is very
necessary to have an effective plan and marketing trends which helps to develop the business
firms and also maximise the profit level of firm. For proper execution of plan, firm should
analysis the all types of expenses regarding the travelling so it that it helps in managing the
profits. There is various factor which influence the profit of the company some are as follows:
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 Season: There are some peak season in which the tourists and visitor use to go for
travelling. This is also known as peak time, the company contact to the customer by
different way of communication and tries attract them for trip by giving them information
about the tour package, for increase their profit of the firms, A Carnival cooperation
company invites many tourists and consumers for travelling by giving them various type
of travelling package with discount so that company can increase their profit. Event: There are various event organises by the company to maximise the profit level of
the company, make sure to the tourist and consumer they do full enjoyment at the event. Government: Government also influence the profit of the company by imposing the high
interest rates on travelling and another reason is rise in petrol price (John and Susan,
2015). Currency rate: There are different rates of currencies in different company which differs
the profit level of the company according to the basic requirement of the business. Due to
this carnival cooperation & Plc company has many customer and visitors of different
company which help the company to increase the profit of the company. Terrorism: If there are terrorist activities happen in the country, the tourists and visitor
don't approach to go in that particular country it led to negative impact for travel and
tourism which affect the company’s profit. Natural Calamities: Natural disaster also influence the travel and tourism company
because wherever the natural disaster occurs tourists and visitor don't ease to visit that
particular place which give negative impact for the company because government ban
that place for travelling (Spencer and Zembani, 2011).
 Development: When government implement some development projects, government
ban that place for travelling and tourism. It also influences the profit of the company.
TASK 2
2.1 Various type of management information that are applied in the travel and tourism sector.
Management accounting can be considered as an administrative tool which are widely
applied in partnership decision making, performance management and devising planning. As a
large business enterprises Dalata Hotel Group apply management accounting system as to
creating effective decision for companied profit. There are various management information
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accounting methods that are applied by Dalata Hotel Group in their business operations in which
some are described as under:
Budget Report: This can be considered as a fundamental tool which is required for a firm or its
higher authority to setting a budget for effectively conduct business and its operations in
systematic manner. Dalata Hotel Group conduct its business operation at a wide geographical
area as to sustaining high and profitable position at market place. Companies manager and higher
authority is very much concern on preparing a budget for firm as to implement various functions
and operation in effective manner. Budget statement represents the expectations of top
management from the low and middle management and helps in significantly implementing
business operations as per the desired budget.
Financial Statement: It is an essential tool which is widely applied by firm and its higher
authority to taking an effective decision which is beneficial for firm and its growth. Management
accounting consist financial statement as an essential tool which helps in analysing the financial
performance of firm. This statement helps in creating effective decision in order to appropriate
utilisation of resources. This is also important in estimating the actual profit and loss of firm.
Variance analysis: This evaluated as an effective tool of management accounting which plays a
vast role in differentiating the actual and planned price policies of firm. This is significantly
applied by Dalata Hotel Group as to maintains their business operation at market area. This is
measured at the time of preparing budge for implementing business operation in future.
Forecasts: Each business organisation have some goals and objectives which are required for
them to accomplish in desired period of time as to reaching at higher position at market place.
The process of forecast is based on the goals and objectives of firm as these helps in creating
differentiation among two firms as each business firm are having their own set of goals and
objectives. This is a planing tools which can be applied as per assumption and helps in planning,
budgeting and future growth.
Management Information System: It describes as an essential tool which is widely applied by
each small as well as large business organisations as to proper managing all information and data
regarding to firm and its various operations. Dalata Hotel Group is focused on taking feedbacks
as to analysing the performance of firm because this is more effective in enhancing
organisational performance through implementing changes as per the needs of operations.
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2.2Use of management accounting information as a decision-making tool
Management accounting is the basic tools which is use for recording evaluating and
reporting the financial transactions of Dalata Hotel Group. It processes all the concern document
of all business performance of the company like, payroll, cost, capital expenditure and other
related issues of sales revenue and owners. It improves the decision making process to attain the
success. It gives various important information in decision-making process which include the
relevant analysis of cost, techniques of activity based costing, making analysis of buy and sells
of the data utilization. These are the the point which is used by Dalata Hotel Group for
management of accounting information. This are some points which help the company for proper
decision making are as follows: Comparison with trends: Dalata Hotel Group use this comparison to analyse the
performance of different years, it helps in managing the various trends to make decisions
and execution of plan related to specific trends in future. Forecasting sales: Manager of Dalata Hotel Group analyses the request of the customer
Dalata Hotel Group which is based on recent information regarding the customer.
Forecasting sales related to obtains the vision and objective of the company to achieve
the target in effective manner.
 New product and service: New product and services are implemented by the manager of
which helps to gain efficient information. It helps in satisfy the need of the customers.
Manager analyses the past structure of product and service of company in appropriate
manner. This company launch new product and services according to the taste of the
customer and tourists which give them satisfaction which helps them to exist in market
place.
Innovative product is very important to business exploration and growth, it led to increase
the profit level of company. If company want to grip the perfection of the tourists and visitor,
they have to implement new products which attract the tourists and visitors. Dalata Hotel Group
introduce latest range of travelling products and services which develops the business process in
attaining the goals and objective of the company. Investment decision: Dalata Hotel Group must analyse the area where the investment is
to be made in future with the help of accounting manager of the company which
determines cost estimation related to the return and new investment in organisation.
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 Raising capital: Dalata Hotel Group implement new investment and new policy to raise
their capital by increasing sales of travelling package to get market return, it can be raise
through the personal capital with the help of private investor venture capital, public
capital and loans. There are different sources by which company can raise their capital
lead to increase of profitability. It determines the solvency of the company also help in
making budget decision making for obtaining the objectives of the company.
 Current issue against profitability: Dalata Hotel Group face the issues regarding
increase the profitability due to new competitor exist in the market which tries to attract
the existing customer of the company leads to financial degradation of the company. It
also related to solvency of the company.
TASK 3
3.1 Travel and tourism financial statement
Financial Statement can be consisting as an essential tool which is effective in analysing
the actual performance of firm at market place. Dalata Hotel Group is Ireland's biggest hotel
operator with a present portfolio of 38 three and four-star hotel more than 7,700 rooms. Dalata
Hotel group was established in the year of 2007 and operates its business activities at a wide area
and the major focused area of firm is to satisfying the needs and wants of firm as to providing
best services and products to their potential buyers (Morrison, 2013). In the year of 2008 Dalata
Hotel Group has introduced a Maldron Hotel brand in which three and four hotels are involved in
the main locations of city. The company is having more than 19 hotels in which 1500 staff
people are work for attaining high growth at market place. An effective comparison among
financial accounts in the year of 2015 and 2016 are described as below:
BALANCE SHEET 2015 2016
Fiscal Year Ends 31/12/15 31/12/16
Assets
Non Current Assets
Intangible 34.5 46.32
Tangible 476.17 704.81
Investments 0.02 0.01
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Other 4.53 5.67
Total 515.22 756.81
Current Assets
Stock 1 1.55
Debtors 8.68 13.55
Cash and Securities 109.93 69.21
Total 119.6 84.31
Held for Disposal 0 0
Total Assets 634.82 841.12
Liabilities and Equity
Liabilities
Current 41.45 58.75
Non-Current 197.38 252.81
Total 238.82 311.56
Equity
Share Capital 372.15 431.02
Reserves 23.85 98.54
Shareholders Funds 396 529.56
Minorities 0 0
Total 396 529.56
Total Liabilities and
Equity 634.82 841.12
Net Borrowings 177.58 197.02
Investment Ratios
Net Tangible Asset
Value Per Share 196.03 259.95
ROCE 6.77 7.23
ROE 6.7 7.28
Net Gearing 44.84 37.21
Gross Gearing 49.53 45.2
Cash 4.69 8
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