Carnival Corporation plc: Finance, Funding, and Pricing in Tourism

This report delves into the financial aspects of the travel and tourism sector, using Carnival Corporation plc as a case study. It examines the importance of cost and volume in financial management, exploring various pricing methods like rack rates, seasonal pricing, and discounting. The report analyzes factors influencing profitability, including internal factors such as production costs and external factors such as economic and social influences. It also covers different types of management accounting information and their role in decision-making, along with an interpretation of financial accounts and the identification of funding sources for capital projects. The analysis highlights the significance of cost minimization, break-even analysis, and economies of scale in ensuring the financial success of travel and tourism businesses.

Finance and
Funding in the
Travel and Tourism
Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
................................................................................................................................................1
1.2 Pricing methods uses in travel and tourism sector...........................................................3
1.3 Factors influencing profit in travel and tourism businesses.............................................4
TASK 2............................................................................................................................................5
2.1 Various types of management accounting information used in travel and tourism
businesses...............................................................................................................................5
2.2 Use of management accounting information as a decision making tool..........................7
TASK 3............................................................................................................................................8
3.1 Interpret travel and tourism financial accounts................................................................8
TASK 4..........................................................................................................................................13
4.1 Sources of funding for the development of capital projects...........................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16
.......................................................................................................................................................17

INTRODUCTION
Concept of finance and funding define the amount of funds required by firm to execute
its business operations and to achieve sustainability. Sector of travel and tourism is known as one
of the fast growing industry that's why it require huge amount of funds (Papatheodorou, Rosselló
and Xiao, 2010). Governments of country also provide funds develop heritage sites so large
number of tourists can be attracted towards these. One of the main features of this is that it help
nation in earn foreign exchange which contribute in its economic development. As per the given
scenario, Carnival corporation plc one of the biggest firm deal in travel and tourism sector is
taken under present study. Importance of cost and volume in travel and tourism sector is all
given in this. Different pricing methods which can be use by tour enterprises for set final price of
product and various elements which affect the profitability of tour organisation is all mentioned
in this. Further various type of management accounting system used in travel and tourism sector
with its importance as a decision making tool is also detailed in this study. In addition to this,
interpretation of financial accounts to assist in process of decision making and different sources
of funds for private and public tourism development is all mentioned in this.
TASK 1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
Carnival corporation plc is one of the biggest firm deals in travel and tourism sector. Firm
offer number of services to its customers. Firm has developed a big portfolio of cruise brand
located in Australia, North America and Europe. Main focus of financial management of firm is
to arrange the funds require to carry out business operations in an effective manner. This consists
various elements such as expenses and cost as these are necessary to consider for attain success.
By consider all these elements firm can formulate better travel packages for visitors.
Cost is a factor which is known as one of the most significant element in travel and
tourism sector. This provide an opportunity to manager to examine the tour packages designed
for the travellers (Ritchie and et. al., 2010). It is very significant for Carnival Corporation plc to
consider the following factors while take decision for enterprise. Cost: This highlight the funds and money which is invested by enterprises in their
business operations. It is known as one of the most significant factor as this largely affect
the growth and profits of tourism industry. This highlights all the expenses bear by
organisation during formulate travel packages for traveller. Further, tour firm decide the
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final price of tour packages for generate profits. It is very essential for Carnival
Corporation not to charge high prices from visitors otherwise they might lose their
customers.
Importance of cost
Cost is known as one of the most influential factor of every business,. This is the one
which contribute a lot in success and growth of firm. For example: If Carnival Corporation plc
will set high price of its tour packages as compare to its rivals then in this situation there are
more chances that firm might decrease its market share as customers will buy it at low price. So
it is very important for firm to set a right price of its products. In this way firm can offer value to
its customers and at the same time can generate large number of profits.
Cost minimisation: It is very important that all efforts should be done by firms to utilise
all its resources at an optimum level and consume less cost so they can offer its products to its
customers at lower prices (Spenceley, 2012). With help of this Carnival Corporation plc can
attract large number of customers which will increase the profits of firm.
Decision making: This section highlights that all important decisions for firm such as
allocation of resources should be done in an effective manner. For take right decision, it is very
necessary that research should be carry out by Carnival Corporation plc. In this way firm can
take effective decision and can achieve its goals and objectives in better way.
Improving performance of management: By take right decision related with cost and
allocation of funds Carnival Corporation plc can increase number of its profits and can utilise all
resources at an optimum level.
Designing financial structure: Different type of cost are involved in managing the
financial resources of Carnival corporation plc. These can be understood by the following points:
VOLUME: Carnival Corporation plc is popular for offering better products and services
to all its customers. Further, number of tools are there in market which can be used by firm to
identify the exact volume of travel and tourism packages that will be required by firm to achieve
BEP (Break even point) and economic order quantity (EOQ).
Significance of volume:
Break even analysis: This is the situation which indicate no profit and loss for enterprise
and every firm so efforts to reach this. Basically, in this enterprise cover all the cost which it
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spent over manufacturing of products and services. Identify the BEP is very essential for
Carnival Corporation plc as with this, firm can identify its position in market.
Economies of scale: This element indicate the cost saved by firm by enhance its level of
manufacturing. With help of this, Carnival Corporation plc can save its costs.
Diseconomies of Scale: When economy of scale does not work in appropriate manner
than it is known as diseconomies of scale (Henderson, 2010). All efforts must be done by
Carnival Corporation plc to eliminate the factors that affect the productivity.
1.2 Pricing methods uses in travel and tourism sector
Carnival Corporation plc is a firm that develop different type of tour packages for its
customers. For take price decision related with tour packages number of methods are there which
can be used by firms.
Rack Rates: This indicate the total amount used by organisations to elaborate prices of its
tour packages without any discount and offer. This methods can be used by Carnival
Corporation plc.
Seasonal pricing: Number of visitors and travellers increase in some specific seasons.
Visitors go to specific places in some particular season. Season based pricing should be used by
Carnival Corporation plc for attain end goals and objectives in easy manner.
Last minute costing: Different type of cost are designed by firm to calculate the cost
occurred in last minute. Number of individuals are there who cancel their plans and flights in
last minute. In this situation, Carnival Corporation plc can generate profits by charge
cancellation charges.
Discounting: In this, company offer discounts to its customers for attract them.
Package deals: This is another strategy of pricing used by number of travel and tourism
enterprises. This strategy is neither poor nor effective in market. Carnival Corporation offer its
tour packages to its customers at minimum price.
Commissions: This is charged as per the bookings done by third party, under this visitors
has to pay more.
Major pricing methods that can be used by enterprises are as follows: Cost based methods: This is one of the most simple method of pricing. Under this a fixed
margin is attached with the firm so it can generate more number of profits (Pike, 2012).
This is further divided into two: one is full cost pricing in which fixed and variable cost is
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used by firm and a percentage of profits is added. Second one is direct cost pricing in
which firm only consider variable cost. This method can be used by Carnival
Corporation plc as with this firm can generate more number of profits and is a simple
method. Demand based method: Under this method, demand of customers is consider by firm to
set the final price of goods and services. In case of Carnival Corporation plc, if demand
is low so firm should lower the prices of it products and if demand is high then first can
set high prices. With this company can generate more number of profits. Value based methods: This is another method of pricing in this seller set the price of
products as per the value of goods and services in market. If product is made up of high
quality then its price will be high as this production cost would be high (Wong, Mistilis
and Dwyer, 2011). In context of Carnival Corporation price of product is decided as per
the number of tourists visit a specific destination. In case of large number of visitors firm
sold its products at high prices.
 Market competition based method: Under this method of pricing, firm set the price of a
product as per the competition prevail in market. In this various efforts are done by firm
to set the price of product low as compared to its rivals as this help firm inn attract large
number of customers and increase the number of its profits (Nielsen and Spenceley,
2011). In context of Carnival Corporation plc, it is considers that if there are more sellers
in market of a product that price needs to be competitive so more number of visitors can
be attracted. In travel and tourism sector, number of tour enterprises are there that offer
various type of services to its customers at affordable prices.
1.3 Factors influencing profit in travel and tourism businesses
It is very important for tour enterprise to formulate and implement better strategies so
they can execute all business operations in an effective way. It is very important for Carnival
Corporation plc to carry out planning so it can offer better services to its customers (vonder,
Weppen and Cochrane, 2012). It is very necessary that all promotional activities should be done
in an effective manner. Planning helps in enhance the profits of firm and at the same time help
company to serve more number of customers. It is very important that various factors such as
cost and other expenses done by firm should be consider by manager before set the final price of
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product. Further, various factors are there which affect the profits of travel and tour enterprise
those factors can be understood by following points:
Internal factors: Cost of production: This is a element which largely affect the profits and travel and tour
enterprises. If cost of production of Carnival Corporation plc will be high than final
prices of profits will be low and vice versa. Final price of products is that one which help
and support customers in take final decision of buying.
External factors: Economic factors: This is the factor which largely affect the price and profits of
enterprise. This consists when government introduce any changes in subsidy or tax rate.
Further, changes in currency rate also impact on number of profits generate by tour
enterprises. Social factors: This element indicate the factors related with society and culture of
visitors. When some kind of special events held in a specific place then it help in attract
large number of customers and increase the profits of enterprise. Further, places which
have a fear of terrorism fails to attract large number of tourist.
 Environmental factors: These are also known as natural element which affect the
travelling decisions of individuals. For example, number of tourist are there which like to
visit some place only in some specific seasons (Evans, Stonehouse and Campbell, 2012).
To attract large number of visitor it is very essential for carnival corporation plc to invite
visitors during that season in this way company can generate more number of profits.
Natural calamities is another factor which affect the number of visitors to a specific
destination.
TASK 2
2.1 Various types of management accounting information used in travel and tourism businesses
Management accounting information is focused on the decision makers as well as the
internal employers. It is an effective management techniques which is helpful in taking some of
the corrective actions and also decisions in an effective or appropriate manner. It is necessary
that company should prepare the effective accounts which help in doing business in an effective
manner. Melin Entertainment manager uses this kind of information system in addition to proper
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better policies. There are some different kinds of management accounting information given
below:
Budget report- It is a necessary tools which Melin Company uses to control and monitor
manufacturing cost. For Merlin Entertainment Plc, budget report is beneficial in enhancing
performance level of company in a proper manner. In addition to this, it is necessary for this
company to make the operational and cash budget in their internal report.
Financial statement- It is used by Merlin Entertainment company to take effective
abreast decisions. The management accounting system explains about the financial statement
which is helpful in evaluating financial performance of this firm. In addition to this, it is
necessary for manager of Merlin Entertainment to take effective and better decisions regarding
performance level of business and take beneficial decisions related to investment. With the help
of financial statement, this company can measure the loss and profit.
Forecasts- The procedure of Forecasts is according the the business objectives and also
vision of an organisation in an effective manner. It can explain about the future wants of specific
services and goods on the basis of organisation's past data. This kind of planning tool is
concerned to assumption. It is helpful in taking effective decisions related to budgeting, future
development and also planning. During allotting budget, Merlin Entertainment Plc firm can uses
this forecasting tool to find the current money on available activities. With the help of this tool,
company can prepare the budget and also manufacture the goods according to consumer needs
and demands.
Variance analysis- The manager of this given company uses this analysis in order to
determine difference in the planned and actual behaviour in business firm. It is an effective or
essential procedure for maintaining the proper business activities along with operations in
competitive advantage.
Management Information System- The main focus of this tool and technique on
information technology and also process of business. The main aim of Management information
system in the Merlin Entertainment company to provide the review which explain about
performance level of an organisation which is measured through top management of this
business organisation. It plays a necessary role in a business firm for generating correct and
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accurate information and data related to Melin company. In order to take effective decision,
employer uses this tool.
 Financial projection: This technique help enterprise in determine the future expenses of a
enterprise. Benefit of this is that it support firm in control the expenses and minimise the
overall cost of business activities.
 Investment decision: Under this various efforts are done by enterprise to utilise all the
available resources to an optimum level. All this help in offer quality quality to its
customers at affordable prices.
With the help of using each kind of information system, Melin Entertainment plc can take
better decision in favour of business firm and also attain aims and goals in an effective manner or
with in a given period of time. But among all these system, management Information system is
very effective and also helpful in providing the competitive advantage to business like for an
instance marketing, financing, production and many more.
2.2 Use of management accounting information as a decision making tool
Concept of management accounting information is an important one as this provide data
related with performance of business. This enhance effectiveness of decision making process and
help firm in achieve its end goals in an effective way. For take right and useful decision for
business it is very important that firm should have all amount of adequate information. For take
better decision it is very important for manager of Dalata hotel to have data related with cost
analysis, data related with make or buy, activity based costing techniques and many more. These
is some use of management accounting information related with decision making process for
dalata hotel.
Compare with the trend: Dalata hotel can identify the trends by match the business
performance of various years. This help firm in take future decisions and formulate plans as per
the trends exist.
Long and short term planning: One of the major use of management accounting is that it
support firm analyse future trends which help in do planning of future activities of business.
Forecasting sales: One of the main feature of collected information is that with help of it,
manager of Dalata can predict the sale of products and services, based on past data. Right
forecasting help business enterprise in attain its goals and objectives in an effective manner.
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New product and service: Information system used by the managers of Dalata can be
used in take right and effective decisions related with new product and service of enterprise.
Collected information guide manager for develop a better product to satisfy the needs of its
customers. With this company can retain customers for a long time period. Manager examine the
structure to define new product and service of firm. With this, Dalata hotel can offer better and
effective services to its customers and can capture a larger market share.
Manufacture products as per the needs and requirements of customers is very necessary
for an enterprise to satisfy them. Every firm do various efforts to increase its market share and to
better satisfy the needs of its customers. This help firm in retain customers for a long time
period. With right use of information, Dalata hotel can serve its customers in an better way and
can capture a larger market share.
Investment decision: It is very essential for manager of Dalata enterprise to make
decision about its future investments. With help of management accounting information manager
of hotel can ascertain the estimated cost related to return and about new investment in business
enterprise.
Raising capital: Dalata hotel can raise the capital by selling a portion of sales in market
to get return on that. Various ways are there in an enterprise to raise capital such as private
investors, venture capital, personal capital, public loans, capital and many more. Internal and
externals sources are there through which firm can raise its capital. Internal sources are more
reliable as compare to the external one. Further, profit is distributed in development of business
operations.
Other decision: Concept of management accounting assist firm in take relevant decision
which contribute in success and growth of firm.
TASK 3
3.1 Interpret travel and tourism financial accounts
Dalata hotel was developed in 2007, this is one of the largest in UK. Hotel is a four star
hotel there are 7700 rooms in all its hotel. Large number of employees work in this hotel and due
to this profits of firm are very high. Company offer large number of quality services which helps
in attract large number of customers towards it. Financial performance of hotel is also very good
and this is increasing day by day. Balance sheet of firm of year 2015 to 2016 is given below:
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10

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Interpretation of financial data
Current ratio: Current assess of firm were recorded 98770 for 2016 and 162278 for
2015. As per the evaluation of current ratio it is analysed that firm invested its financial
resources more in in fixed assets. It causes the liquidity of organisation.
2015 2016
2.89 1.44
Acid ratio: In comparison to year 2015 acid ratios of firm declined from 2086 to 1.41
which highlights reduced amount of firm in cash and liquid assets. Cash and cash equivalents for
the firm in year was 81080 and 149155 in 2016. further, trade receivable were 15874 and 11774
for year 2016 and 2015 respectively.
2015 2016
2.86 1.41
Return on capital employed: Profit for firm before tax was recorded as 44111 for 2016
and for year 2015 it was 28457. in addition to this capital employed for 2016 was 620382 and for
2015 was 537296.
2015 2016
5.82 4.98
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Return on assets: Fixed assets was recorded 886605 for 2016 and 669058 for the year
2015. Further, 290551 and 225673 was recorded as turnover of firm for the year 2015 and 2016
respectively.
2015 2016
3.74 3.78
Net profit ratio: Net profit of firm was recorded as 34923 for 2016 and 21626 for 2015.
Net profit of firm was calculated in respect of sales.
2015 2016
9.58 12.02
Stock turnover ratio: This ratio is calculated on the basis of closing stock and turnover of
firm during 2015 and 2016. Closing stock of firm was recorded as 1817 for the year 2015 and
1349 for the year 2016.
2015 2016
89.50 69.40
In year 2016, revenue of hotel is about € 290 million which indicate that profit level of
Dalata hotel is very good as compare to other hotels, in 2015 revenues of hotel was € 225
million. Number of profits of firms are increasing day by day. In 2016 growth rate of firm is 36%
as compare to 2015. All operations and activities of hotels are indicating that firm invest a lot in
its various functions for achieve growth. Following are the strategies that indicate about the
growth of Dalata group:
 It is very necessary for manager to formulate a business plan and invest more in
infrastructure. This will offer various development opportunities to firm and will help in
achieve goals in an effective manner with minimum amount of time.
 Future of plan is to open approx 1200 rooms in its hotels in UK and Ireland.
 As number of profits of firm is increasing so firm can reinvest the same in developing
infrastructure.
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TASK 4
4.1 Sources of funding for the development of capital projects
Concept of funding is given by the Ministry of department for welfare and growth of
tourism industry. Number of sources are available in this context which are as follows:
Role of culture, sports and media: This is helpful in promoting valuable thing,
developing campaign and many more. In case of tourism, it comes under the responsibility of
government to protect the culture and artistic heritage. Further make the places more effective
and better with help of innovation is also come under the responsibility of government. Further,
tourism department is the one which encourage individuals to take part in various heritage
development programmes and cultural places.
Capital project:
 This indicate invest huge amount of funds require for introduce changes in project and
for development. It involves acquisition of land, buy property and lease equipments. For
promote travel and tourism sector and to generate more number of profits, capital project
are necessary as this require invest more funds in promotional activities. Various type of
capital budgets are there related with travel and tourism sector.
 Project related with the cross railway give contribution in economic development of
country. All this help in development of transportation and this results in a big change.
 Tourism information centre is the one which remain responsible to offer attractive and
convenient destinations to visitors.
Sources of finance in travel and tour industry are as follows: Pubic finance: In this government of country, play a big role in contribute more in
economy. Government provides funds to ensure development of various places so it can
attract large number of visitors and can generate more number of profits. Venture capital: Under this venture capitalist provide their funds to the business idea
which have high potential of growth. Debenture: This is known as economic mode of finance as compare to equity because it
does not provide any kind of control to investors.
 Equity shares: This share is popular and one of the most common mode of finance for
large businesses. Under this right of ownership can be shared.
Non public finance or internal source:
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Debt collection: This indicate the money collected by firm through operating activities
such as fee.
Investment of owner: In this, firms start doing investment in activities related with other
sector.
Retained profit: This indicate the amount of profit which owner kept as a reserve.
CONCLUSION
From the given project report, it can be summarised that, for generate large number of
profits it is very essential for tour enterprises to set the right price for its products. This not help
firm in generate more amount of profits but at the same time help in better satisfy the needs of
customers. Various elements are there which affect the profitability of enterprises working in
travel and tourism sector so all those factors must be examine by firm to generate more number
of profits. Further different type of information related with management accounting system is
also used under travel and tourism sector as this helps manager in take better decision. Various
sources of funding are there in travel and tourism sector.
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