Finance and Funding in Travel and Tourism Sector Analysis Report

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, focusing on key aspects such as the importance of costs, volume, and profit for management decision-making, with Carnival Corporation & plc as a case study. It explores various pricing techniques employed in the sector, offering insights into how businesses like Carnival Corporation & plc manage their finances. The report further delves into the use of management accounting information as a decision-making tool, using The Fulham Shore plc as an example. Additionally, it includes an interpretation of financial accounts, comparing performance over two years, and an analysis of funding sources and distribution for tourism-related capital projects. The report aims to enhance understanding of financial management practices within the travel and tourism industry, equipping readers with the knowledge to make informed decisions and interpret financial data effectively.

Finance and Funding in the
Travel and Tourism Sector

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Importance of costs and volume in financial management of travel and tourism businesses
using Carnival Corporation & plc ..............................................................................................3
1.2 Evaluating pricing techniques used in the travel and tourism sector....................................6
1.3 Determine elements influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands.................................................................................................7
TASK 2............................................................................................................................................9
2.1 Different types of management accounting information that could be used in travel and
tourism businesses using The Fulham Shore plc........................................................................9
2.2 Evaluate the use of management accounting information as a decision-making tool for The
Fulham Shore plc......................................................................................................................11
TASK 3..........................................................................................................................................12
3.1 Interpret financial accounts of The Fulham Shore plc for the year ended 25th March 2018
showing at least two years performance (for example comparing 2018 to 2017)....................12
TASK 4 .........................................................................................................................................14
4.1 Analyse sources and distribution of funding for the development of capital projects
associated with tourism. (Covered in leaflets)..........................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
APPENDIX....................................................................................................................................16

INTRODUCTION
Finance is an important and necessary function of any business that helps in performing
daily activities (Jucan and Jucan, 2013). Funding is providing financial resources to fulfil need
related to business project and program. It is normally used by firms to fill the need of cash from
internal reserves and acquiring adequate level of finance. In Travel and tourism sector, finance
and funding both play an important role. The report is focused on importance of costs, Volume
and profit for management decision making, use of management accounting information as a
decision making tool and interpret financial accounts to assist decision making and understand
sources and distribution of funding for public and non public tourism development.
In order to prepare report two organisation have been taken into consideration namely
Carnival corporation Plc and The Fulham shore plc. In task one Carnival corporation plc is used
to study the pricing methods and factors in travel and tourism sector. In task second the Fulham
shore Plc is used for different types of management accounting informations. In task third
interpret financial accounts to assist decision making in travel and tourism businesses and in task
four understand sources and distribution of funding for public and non public tourism
development.
TASK 1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
using Carnival Corporation & plc
Tourism sector is a fast growing business and carnival corporation Plc is one of them. It
is a cruise company of United States of America. Carnival corporation is US based travel,
tourism and cruise operator company. It is combined swift of over 100 vessels across 10 cruise
line. Main objective of this organisation is to expand their service across the globe, so group of
people can take advantage of it. The main goal of this organisation is to become leader of
travelling industry (Swarbrooke and Page, 2012).
Cost
Cost is refer as the main part to conduct business activities as a function in every
company. As a travel and tour company has involved cost of tour package so the manager has
organise several tours for providing appropriate packages to clients. There are different types of
cost they are mentioned below -

Fixed cost – In this mention those costs are fixed during the production that is related to
different goods and delivery services in travel company. Many times in company have some
goods are fixed and some are variable so it is included in semi variable.
Variable cost – There is refers to that cost keep on fluctuating with the production of
various goods and services like as ticket charges.
Direct cost – It is straight away connected by the company of carnival on the line of
cruise. It is also provided other services to customers.
Indirect cost – It is not connect in every manner with company and it is relate to specific
activities like delivering several services for visitors like as maintained charges and repair
charges.
Importance of costs:
In present time cost is very important that define price of any product and it will help to
maximising profitability of company and also in long term growth. There are discussed about
importance of costs-
Direct cost – It is helping to control cost that are related to several operation activities and
it provides multiple benefits that are not directed traced.
Indirect cost – It is related to several operations which are performed in company for
many benefits.
Fixed cost – It does not change in production units and also does not pay extra cost on
additional unit.
Variable cost – It will help to manager for decision making regarding to different tasks
and project which affect to financial planning.
BEV
Sales 800000
Fixed cost 120000
Contribution 600000
BEP 0.2

Sales Contribution BEP
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
BEP Analysis
Column H Column
H
Volume is the term which is frequently used in financial management to show total cost
in proportion to quantity bought or sold. Estimation of total costs is helpful for identification of
break-even analysis and cost volume analysis. This helps organisations to make accurate
decisions on the basis of volume.
Importance of volume
Cost volume analysis - It is useful for the managers to take decision for the organisation.
This analysis provide the information in very deep and effective way which is going to help
further in decision making. It shows the relation between the cost and volume, it is an important
analysis of planning regarding profit. Proper planning of profit is comes under the budget or
forecasting but cost volume analysis provide the overall overview of profit.
Break-even Analysis: - This analysis is used for identify that point where organisation
have to sell their products without having any loss or profit. If organisation sold more product in
comparison to that point than company have profit. If company fail to sell product which is
lesser than that point than company having loss. For example: - company have to fix their travel
packages more than that amount which gives no profit or no loss condition. Margin of that
amount is considered to be company's profit.
Decision making: - Cost and volume (CV) analysis plays a most important role in
financial management, because manager will take decision on the basis of cost and volume
comparison. CV is used for making budget and which gives idea, how to maximise profit and
productivity. Decision making help to enhance the productivity and efficiency. For example: -
travelling company have different vendor option to choose, so they will take decision on the
basis of low cost of vendor which provide higher facilities.

 Cost reduction: - Cost determined the actual profit generated by particular activity, after
knowing actual cost of product, management will try to reduce it's cost. Make strategies
for reducing cost of each product. For example: - In the travelling business, they will try
to reduce cost of each package which is going to offer customers and it will increase the
profit margin for organisation (Hartman, Paris and Blache-Cohen, 2014).
 Combination of cost and volume: - Every organisation have goal to maximise profit for
that they have increase sales volume which generate profit. So automatically best
combination of cost and volume will provide higher profit.
 Detailed prospective: - It shows the clear picture of company's activity which include
every things such as minimum cost required in producing goods. It provide the alternative
options to the managers that will help in to reduce product cost and produce more
volume.
 Improvement of management performance: - Cost help the managers to improve their
quality of performance in travelling business. It provide options to the management to
take decision on the basis of cost. It increase the efficiency and productivity of the
organisation as well as management performance. For example: - In travelling business,
efficiency of management team will increase if they aware about other availability of
option.
 Establishing the financial structure: - Financial structure of tourism business is
perform on the basis of cost. After the consideration, most of the truism business will
check the competitor's financial structure and use cost techniques. For example: - In the
truism organisation, financial structure make according to it's competitor.
1.2 Evaluating pricing techniques used in the travel and tourism sector
Pricing strategy are the techniques that are applied on different products and set prices
according to their demand (Biggs, Hall and Stoeckl, 2012). These methods to determine different
prices for different products that are easily sold according to supply and demand. This helps the
organisation to accomplish satisfactory level of profits from it. Different pricing methods that
followed by the Carnival corporation plc are explained below -
Skimming pricing method –
This pricing method followed by market leaders and in the method the company set high
prices for their various products and services. With the help of high prices the AIDA cruise is

able to recover their incurred cost as soon as possible for higher profit. In short time period they
are applied effective pricing strategy for recover their cost and after that they enjoy higher level
of profits. Cost based pricing - Cost based pricing mention as a pricing strategy in which added
some percentage of desired profit in cost of the product to acquire actual price. In this method
particular percentage added in the total cost for ascertain selling price. It can be divide in two
types, they are as follows -
 Cost plus pricing – Carnival corporation & plc make use of cost plus pricing method in
order to set their prices. In particular pricing method create situation according to cost
like fixed cost and variable cost. Once they add up all costs then they add mark up
amount in it which is their profit share. With the help of this method they set suitable
prices for their products and services. It aids business in generating expected revenue and
sustain in market for longer duration.
 Mark up pricing – In this pricing method a particular fixed amount or percentage of cost
of the product added in to price of product and achieve selling price. It is mainly used by
companies to earn more profit.
Demand based pricing
It is mention as a pricing method in which price of the product based on the demand. If
the demand of the product is high so company set high price to acquire more profit and demand
is low so they are set low price to attract more customers. The success of this pricing method
based on their market ability and also analysis of market demand (Smith, 2014).
Competition based pricing - It is describe as a pricing method which an organization
mention about prices of their competitors' products (Eagles, 2014). According to competitor
strategy the company set their prices of the products and charge higher, lower and average prices
compared to the competitors.
1.3 Determine elements influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands
Profit is a financial benefit that is realized when the amount of revenue gained by tour
and travel company through their business activity. There are several factors that are affected to
profit of carnival corporation & plc in efficient way. There are following some factors that are
described below like as -
Terrorism -

It is the effective factor that influence of the profit earning ability of the carnival
corporation & plc. Due to increase terrorism activities it is effected as reduction in the tourism
activities and the business involved into tourism activity like as carnival corporation & plc can
not get appropriate fund for survive their business in effective way.
Tourism season -
When the tourism season is at peak level that time carnival corporation & plc earn higher
profits through business activities and they are easily getting their goals and objectives. It will
help to meet out their expenditure and other needs of company. When there is off season they are
not earning much more revenues according to their objectives. So tourism season impact on the
profit earning capacity of the carnival corporation & plc (Sanjeev and Jauhari, 2012).
Security and safety issues -
When terrorism activities or any other activities happen in nation that time security will
be increase by government. As a result of higher security implement bear in mind travel
restrictions or increased sensitivity. If there is threat on destination so reduce number of tourists
due to uncomfortable. It is affect to profit of carnival corporation & plc on a major level.
Government support -
In many cases, the government tourism board are the single source of funding for a travel
and tourism company. And many times government are fluctuated according to time so they are
applied their rules and regulation that can not favourable for carnival corporation & plc. So it is
influence of profit of the company.
Current rates -
International travel supplier effected by fluctuations in the currency rates between
different countries. For example – The amount of dollar was low against the British pound in the
mid of 2000s so influence show as reduction in US travellers. As a result people can not take
interest to particular country due to rates and it is influence on profit of carnival corporation &
plc.
Political stability -
Political stability of the nation also impact on the profit of carnival corporation & plc.
Due to effect if they are charges fixed amount on their various services and earn capable level of
profits with the effect of it. From the other side if the political party fluctuated so they can get fix

rate of taxes due. It is affected to finalise their prices and as a results they are failing in attract
tourist for them (Jayawardena and et. Al, 2013).
Climate -
Tour and travel companies are mainly based on seasons cycles. A pleasant climate will
always have more number tourists towards it. In the case of carnival corporation & plc become
capable enough in order to get the particular set of profits. But changeable seasons effects to
reduce number of tourists as a result it affected to profit earning capacity of the company.
The carnival corporation & plc apply effective strategies in order to influence their costs
and determine their overall profitability. The company set effective prices for attain higher level
profits and it will accomplish with the help of different methods after that compare to other with
higher level of sales. Several factors are affected to profit earning capacity of the company like
as climate, terrorism activities and political stability.
TASK 2
2.1 Different types of management accounting information that could be used in travel and
tourism businesses using The Fulham Shore plc
Management accounting helps the managers to take decision on the basis of available
accounting information. These informations is used for planning and to control Fulham shore
plc's activity. This accounting information involves to prepare reports and provide accurate
financial data on time. By using this information managers will make strategies according to it.
Management accounting collect data from different sources and convert them as a useful
information (Seetanah and Sannassee, 2015). It will increase the organisational efficiency as well
as effectiveness to take decision. This accounting method provide three major type of
information. First one is about profitability, second is liquidity and third one is financial position.
These informations is very sensitive and important for the Fulham shore plc. With the help of
these data managers build policies and take important decision in respect of the company.
Management accounting information is used for the purpose of forecasting, comparison and for
future investment decisions.
Explain different type of management accounting information: -

In the management accounting, there is different type of accounting information available
for the analysis of company's activity. Manager will prepare these reports for the purpose of
analysis and to build strategies for the Fulham shore.
 Budget report: - This report is very critical because it measuring Fulham shore company's
performance. It is prepared for the comparison of projects such as estimated performance
with the actual performance. This report is like a tool for the managers to control each
cost of production. Budget is made on the basis of past information and it will help them
to compare cost of project. Company's budget includes all the related revenue and
expenditure sources. Fulham shore's managers will try to achieve organisational mission
and goals through spending money under budgeted value.
 Financial statement: - Manager of Fulham shore use the company's financial statements
to take decision on the basis of available accounting information. Management will use
this information for the purpose of analysis and for making strategies (Buhalis, Darcy and
Ambrose, 2012). These financial statements is used for the analysis of future investment,
and it can be possible or not. It includes the income statement which shows income and
expenses of Fulham shore's company of a particular time period. Balance sheet shows the
actual performance of organisation which includes the assets and liabilities. These
statements will help the management to make strategies and take decision for the
organisational benefits (Rodriguez, Williams and Hall, 2014).
 Variance analysis: - In this analysis management will compare actual or targeted
outcomes and the difference is called variance. It can be measured in terms of cost as
well as in revenue and the comparison of this analysis is based on quantitative aspects.
Manager will try to find out the reason of differences and consider that difference in the
next future budget. Choose appropriate methods to find out reasons and control the
difference of variances.
 Job cost report: - Fulham shore company's manager used this method to show all the
expenses and profit of all the projects. With the help of job costing report, manager can
identify the actual profit generating project. Which one is high profitable project and
which one is occurring loss. Job cost is calculated by adding all direct material, labour
and overheads of the Fulham shore's company.

2.2 Evaluate the use of management accounting information as a decision-making tool for The
Fulham Shore plc
Management accounting information is important for both internal and external users of a
company. With the help of Harmful shore plc can make key decision for benefits and it also
helps in mentation of all the related factors related to current and future problems. It helps to
Fulham shore plc to evaluate all the records an factor in determine approach. It will help to
management to make effective decision for make productive capital budgeting program. The
management accounting information provides many financial information like as capital
budgeting, financial analysis and ratio analysis. With the help of these information recording,
keeping and analysing all the information and business transaction (Gibson, Kaplanidou and
Kang, 2012). Fulham shore plc apply for draw an effective conclusion and provide help in
financial analysis, collect data regarding to performance of company and used efficiency to
increase it. It helps to identify the way of cost cutting and evaluate actual and budgeted figures to
control unproductive activities. In the company it is working as decision making tool they are as
follows -
Comparison with trend -
The management of Fulham shore plc can analyse the trend for comparison with the
performance of several year and make the future decision and create plan according to presenting
trends of market.
Forecasting -
The management accounting information helps to manger of Fulham shore plc company
to determine the potential demand of the product compare with past data of product. With the
help of forecasting helps to accomplish their objectives and vision.
New product and service -
When manager of company launch new product in market that time they can use
management accounting information and take appropriate decision according to new product. It
is analysis of current market structure of the business then prepare strategy to introduce new
product in market (De Sausmarez, 2013).
Investment decision -

The management accounting information provides all financial information to provide
help to manager for investment decision. With the help of accounting information the manager
predict of cost and return from the new investment.
The accounting information useful for the manager to taking appropriate decision
regarding to business. The management of company can use accounting information to create
future business strategy and goals for the business. It also provide help to make balances between
two different organizations.
TASK 3
3.1 Interpret financial accounts of The Fulham Shore plc for the year ended 25th March 2018
showing at least two years performance (for example comparing 2018 to 2017).
Financial accounts are prepared by the company in the end of year to know actual
performance of company. In financial accounts including company's profit, cash flow, debt,
investments etc. for interpretation of final accounts applied various methods such as trading
account, profit and loss account, cash flow statement and balance sheet. There are interpretation
of financial accounts of Fulham shore plc are as follows -
Interpretation of financial accounts can be done by using ratio analysis -
1. Current Ratio = Current assets / Current liabilities
Particular 2017-18 2016-17
Current assets 5503 3925
Current liabilities 12007 14045
Current ratio 0.46 0.28
Current ratio defines the relationship between current assets and current liabilities. The
ideal current ratio is 2:1. The company have current ratio 0.46:1 in 2017-18 and 0.28;1 in 2016-
17. it shows improvement in current ratio in the year 2017-18 and they have less than ideal
current ratio. So there is need to increase current assets and decrease current liabilities.
2. Quick ratio = Quick Assets / Current liabilities
Particular 2017-18 2016-17
Quick assets 4013 2873
Current liabilities 12007 14045