Viorica Secrieru: Finance and Funding in Travel & Tourism Report

This report provides a comprehensive analysis of finance and funding within the travel and tourism industry, focusing on Carnival Corporation and its financial management practices. The report explores the significance of costs and volume, detailing direct and indirect costs, fixed and variable costs, and their impact on decision-making and profit maximization. It also examines various pricing methods used in the industry, such as rack rates, seasonal pricing, and package deals, with examples from different companies. Furthermore, the report addresses the use of management accounting information, including financial accounts, as a decision-making tool and analyzes sources and distribution of funding for capital projects in tourism. The report covers key concepts like break-even analysis, economies of scale and provides an overview of the financial structure of a business firm. The report also touches upon the impact of volume on financial health and how businesses determine the ideal volume for traveling packages. The report provides an in-depth look at the financial strategies and operational aspects of businesses in the travel and tourism sector.

Viorica Secrieru
Unit 2
Finance and Funding In travel & Tourism
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of costs and volume in financial management of travel and tourism sector 1
1.2 Pricing methods used in travel and tourism industry 4
1.3 Factors influencing profit for travel and tourism......................................................... 6
TASK 2 - Covered in PPT 8
2.1 Explain different types of management accounting information that could be used in travel
and tourism businesses
2.2 asses the use of management accounting information as a decision -making tool
TASK 3..........................................................................................................................................19
3.1 Travel and tourism financial accounts................................................................................
TASK 4 -Covered in Leaflet..........................................................................................................22
Analyse sources and distribution of funding for the development of capital projects associated
with tourism
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance and funding is a necessary concept which helps in determining a proper amount
which firm can invest in the development of an economy. Travel and tourism sector is a rapidly
growing industry which gives high benefits to the business. This given report is based on
Carnival plc which is the world's biggest leisure travel and tourism business firm. This company
gives its contribution in developing and increasing the economy of United Kingdom. In the
present report, importance of volume and cost in the financial management of travel and tourism
business will be discussed. There is an analysis of pricing methods which are used in travel and
tourism industry. This business report covers various kinds of management accounting
information which could be used in the travel and tourism business (Airey and Chong, 2010).
Further, use of management related accounting information as decision making tools and also
techniques will be assessed. Report will also cover Dalata Hotel Group Plc which demonstrates
an interpretation about the financial accounts of an organisation and also comparison of two
years of financial accounts. Apart from that, distribution and sources of funding for development
of capital related projects related with tourism will be highlighted here.
TASK 1
1.1 Significance of costs and volume in financial management of travel and tourism sector
Carnival Corporation and plc is the largest leisure travel and tourism company in all over
the world. This company has a big portfolio of a cruise brands which is in Australia, Europe and
also in North America. The financial management is concerned with deployment and
arrangement of finance in doing business functions of Carnival Corporation in an effective
manner. It includes business of travel and tourism which is comprised with different costs along
with expenses necessary in development and growth of travelling packages for customers or
visitors at a large scale.
In the business of travel and tourism, cost factor is very important in order to evaluate
cost of packages for visitors (Cole and Morgan, 2010). Carnival corporation plc is using many
factors in context of taking some effective and beneficial decisions in tourism sector.
Cost- Cost refers to that money which is incurred from the business related operations
and also activities in an organisation. It is an important element which can affect the business as
well as activities. It is related with to all expenses or price for growth and also developing the
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travelling packages for customers. There are many types of expenses for increasing the demand
of tour packages for visitors.
Allocation and apportionment- (Under this, over costs are incurred through business
firm which are apportioned and also allocated. This allocation is related to concerned department
of in case it is visible to that department which is responsible for this kind of costs. In in case the
cost can not allocated in a proper manner then it is an apportioned to all departments.)
Overheads expenses are not related with to direct material or labour.
Types of costs are given below:
Direct cost- It is a cost which can be completely attribute to manufacturing of particular
products as well as services. This cost impacts on production process of company. This cost is
helpful in the operational planning of the tourism.
Example- Direct materials, Direct labour, wages, commissions etc.
From direct cost, Carnival Corporation develop its master budget and know about its all
expenses, here we can cite the cost incurred by the company for providing transportations,
accommodations and food facilities, all direct expenses. Also, the costs of providing the staffs
salaries can be considered like direct costs.
Indirect cost- These cost impacts on manufacturing process indirectly such as labour or
material. Those costs can also be called overheads. [In context to this of Carnival Corporation
and plc it is necessary for firm to determine its additional labour, rent, administration expenses
and cost in providing consumers’ services, energy costs, cleaning costs etc.]
Fixed costs are costs that remain unchanged, which does not depend on the volume of
production, for example, if in restaurant are served one or more customers, the rent
remain fixed. In Carnival Corporation and plc, the fixed cost is the salary for the manager,
salary for permanent staff, electricity expenses, insurance, the costs incurred to maintain
the business deals with hotels and airline organisations. (This is a good answer!)
Variable cost- This kind of cost is changes according to additional united in producing
services and goods in an effective manner. Expenses can be fluctuated in every month or year. It
is not fixed.
For an example- Carnival Corporation is focus on providing memorable as well as
unique experience to tourists. The salary wages paid to the staff members are another example of
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variable cost, also we can cite here the food and beverage costs, telephone call charges. When
the demand for food increase, the costs of food go up as well.
Importance of cost. This is critical for development of an organisation. It plays a
necessary role in the failure and success of business. If in case the product cost of given firm will
be higher in comparison to its competitors then in this case, company cannot increase its sales. If
the cost of cited firm will be minimum then it can increase its growth and also development.
Cost minimization- the cost refers to most necessary factor in a business firm and from
this it provides the minimization cost in operations as well as business activities and helpful in
maximising profit level in an organisation (Koutra and Edwards, 2012). The cost can be
maximum and minimum which is based on business needs. It is necessary that manager can
control cost and manage all financial accounts in a proper manner.
Decision making- Cost can be executed in the process of decision making on capital
budgeting in order to optimise the return on investment.
Improving performance of management- Cost is helpful in raising the performance of
financial management and it gives the various cost of all the projects in order to compare
financial ability of travel and tourism business.
Designing of financial structure- A financial structure of a business firm are designed ,
managed and also controls with the various kinds of cost in the travel and tourism sector.
Volume- Carnival corporation plc provides its effective products and travelling services in all
over the world. There are different kinds of techniques and tools which this company used in
order to compute an ideal volumes of travelling packages that develop the more profit like for an
instance break even point, EOQ and many others. Volume refers to the expenses quantity which
displays in the monetary term in an organisation.
Significance of Volume
Break even analysis- It refers to the process of evaluating break even point in which a
business firm covers all the costs which spend on expenses. For the business of travel and
tourism sector, it is necessary for firm to measure a break even point in order to perceive
covering period of cost.
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Economies of scale- These are the extra cost which is saving with increasing in the level
of manufacturing. With the help of executing an economies of scale, tourism industry can save
its cost in an effective manner.
Diseconomies of scale- In this when economies of scale do not proper functioning for
business then it is called as a diseconomies of scale. In context to the tourism business,
determination of volume should be know regarding the business working.
1.2 Pricing methods used in travel and tourism industry
Pricing is most important factor behind the revenue and profitability of the company. The
organisation have to take the right pricing strategy to maintain the profitability and image brand.
Carnival corporation plc organisation has been proving the many type of travelling and
tourism packages to the customers (Ma and Hassink, 2014). In context to decide the effective
and goof price of various travelling packages and it also uses the various pricing methods and
techniques. There are some pricing tools or methods which executed in the tourism and travel
industry:
Rack rates- These are the total rates which are elaborated through the business
organisation without any kind of offers and discounts. These rates are for the whole season
which is written on printed Brochures.
Seasonal pricing- In a whole year, there are many seasons in order to optimum the
visitors visits. Seasonal charges are depend on the visit of consumers which are in the particular
season and also changes according to the changing season.
Last minute costing- This is related to the various costs of the tourism and travel
business which are differentiate on the basis of forward booking or can say last minute bookings.
It is a kind of last minute deals. It is necessary for business to manage all the prices on the basis
of booking.
Discounting- It is a method of pricing which is according to the discounts given to the
tourists or visitors (Papatheodorou, Rosselló and Xiao, 2010). In this a cited business firm
provided the discounts to elastomers in order to attract the visitors.
Package deals- These are the pricing methods or technique of travel and tourism sector
which firm is decided on the basis of various facilities given to the travelling packages to
visitors. This method is nor effective and also beneficial for the business. The cited company
provide its travelling package at the minimum cost to consumers.
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Commissions- It is charged according to the bookings which are done through the third
party. This type of pricing method charge more money from this visitors.
Examples of various business from travelling industry- Tourism and travel sector is a
tourism state government which uses the method of season pricing in generally but it prefers the
pricing as the method of pricing but this company can change on the basis of needs of travel and
tourism sector. Carnival corporation plc is operate its business in travel sector and it this
company provide its travelling facilities in the Australia, Europe and also North America which
chooses a dynamic method of pricing for its business operations and activities (Ritchie, Amaya
Molinar and Frechtling, 2010). In context to this Cape tour is other business organisation which
gives its travelling packages for only South Africa and also use the method of seasonal pricing.
Some of the pricing methods are given below as above:
Cost oriented method- In this method of pricing the fix margin is mixed to costs so that
firm can gain the more profit from its business activities as well as operations in an effective and
systematic manner. It is a simplest and easiest method for determining the profit with the help of
this pricing method.
Market oriented method- In this method, price is determined on the basis of competition
level which can obtain in market place. The high and low cost is based on costs which is going to
prevail at the market place through many competitors. In this travel and tourism industry the cost
oriented method or pricing is applied because it is helpful in enabling to adjust a best margin for
an organisation which is helpful in gain some profit from business. This type of pricing method
is very effective and also convenient. In context to this, market oriented is also applied by the
company ion order to compare the cost with its competitors in order to retain at market place for
long period of time.
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1.3 Factors influencing profit for travel and tourism
Profit is the difference between the costs of production and revenue earned from sales.
Fig.1 Source -Ulearne
An effective management business strategy is very necessary tool and technique which
can influence on the profit level of an organisation. It is necessary that firm should make
planning in an effective and also proper manner (Sebele, 2010). Manager should execute the plan
in an effective manner by including the staff members.
Activities related to the promotion and also advertisement and these both are helpful in
aware people about the services as well as products of an organisation.In this present business
market, marketing planning is very necessary in order to maximise the profit level and
development of a business firm, also to determine all the expenses and with the help of this it can
analyse its profit. There are some functions of Profit: to attract new businesses, to encourages
efficiency, to encourages enterprise, innovation and risk taking. In addition to this, there are
many different factors or elements which can impact on the profit of travelling industry business,
among these some of are discussed below as above:
Seasons- There are some diverse seasons which can develop an impact on the profit of
tourism sector as it detailed a normal one and also peak season. During the peak season, the
profit of this cited company can be increased in a proper manner (Sheldon and Dwyer, 2010). On
the hand in the common or normal season the profit of firm decreased. A Carnival Cooperation
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and plc company invites many tourists or customers at the peak season in order to increasing the
profit level.
Events- It can also be impact on the profit level because of the different methods of
pricing and the events attracts the people to enjoy. It helps in increasing the profit of an
organisation.
Government- The elements of government can be impact ion the profit of firm like the
cost of petrol.
Currency rates- The rates of currency in every country are different from each other.
The currency rates are different the profit level on the basis of requirements of business. Due to
this Carnival Corporation & plc company has many visitors from the different countries and this
is helpful in increasing the profit of this company.
Terrorism- An attract of terrorists can be in any country and from this the tourism sector
negatively impacted.
Natural calamities- These are the disasters which impact bad on the profit of travel and
tourism sector because in many areas where the chances of calamities are more visitors do not
not for visit there (Song and Lin, 2010).
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TASK 2
Explain different types of management accounting information useful I travel and tourism sector
and assessing the use of management accounting information in decision making.
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