Financial Management and Funding in Travel and Tourism Sector Report

This report delves into the financial aspects of the travel and tourism sector, focusing on Carnival plc and the Dalata Hotel group. It examines the significance of cost and volume in financial management, exploring pricing methods like rack rates, seasonal pricing, and discounting. The report analyzes various management accounting information used for decision-making, including cost-based, demand-based, value-based, and market competition-based methods. Furthermore, it interprets financial accounts to aid decision-making and highlights sources and distribution of funding for public and private tourism development projects. The analysis covers break-even analysis, economies of scale, and different pricing strategies, providing a comprehensive overview of financial management within the travel and tourism industry.

Finance and Funding in the Travel and
Tourism Sector

INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Significance of cost and volume in travel and tourism sector..........................................4
1.2 Analyse of pricing methods used in travel and tourism sector.........................................6
1.3 Analysis of different factors which influence profitability of travel and tourism...........7
TASK 2............................................................................................................................................8
2.1 Different kind of management accounting information which used in tourism sector....8
2.2 Utilisation of management accounting information as a decision-making tool...............8
TASK 3............................................................................................................................................8
3.1 Interpretation of financial accounts to assist decision-making.........................................8
TASK 4..........................................................................................................................................13
4.1 Sources and distribution of findings for public and private tourism development........13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance and funding is an essential concept which helps the company in defining the amount
that can be used by the company to invest in developing the economy. Travel and Tourism is
considered as the fastest growing industry which is giving huge benefits for the business world
as well (Evans, Stonehouse and Campbell,2012). This report is based on Carnival plc which is
also considered as world’s biggest travel and Tourism Company. This firm is contributing highly
in developing the economy of UK. In the current report, the importance of volume and cost in
financial management of travel and tourism companies will be discussed. The pricing methods
that are used by these types of companies will also be discussed. It will also cover various types
of management accounting information which can be very useful in travel and tourism business.
Along with this, accounting information related to management as decision making tools will
also be assessed. One more company that will referred here is the Dalata Hotel group Plc where
analysis of financial accounts of the company will also be assessed. 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 cost and volume in travel and tourism sector
It is well known that Carnival Corporation and Plc is considered as the biggest leisure
travel and tourism company in all around the world. This association has created a big portfolio
of cruise brands that are basically located in Australia, Europe and in North America as well. The
financial management of company aims to arrange finance for conducting operations of the
company in an effective as well as efficient manner. It normally includes factors like cost and
expenses that are necessary to be considered in order to bring growth and development. Through
these factors travelling packages for customers or visitors are created (Henderson, 2010).
It is to be considered that in the business of travel and tourism, cost is considered
as a very important factor as it is very useful in evaluating cost of the travel packages that are
designed for the travellers or the visitors. Carnival Corporation and Plc is making use of these
factors while taking some decisions for the company. The factors are as follows :-
COST – It can be termed as that part of money which is used by companies for their business
related operations. It is considered as a very important element because its absence can create
many problems for the companies. It includes the expenses that is bear by company for creating

goods and services for the visitors and the prices which they are giving in order to bring growth
in the travelling packaging if the visitors. Carnival Corporation and Plc will have to make sure
that they do not charge high cost from their customers otherwise they might lose their customer
base.
Importance of Cost
It is a very essential element for every company. It plays a very important role in making a
successful or making it a failure (Heung, Kucukusta and Song, 2011). It is believed that if the
product cost of Carnival Corporation Plc will be higher than those of its competitors then here
company might loose their customers as the customers will take services from there where the
prices will be low. So, it is always prescribed that the cost of the company should be affordable.
Cost Minimisation: It is very necessary for the companies to make sure that they are using
less resources and consuming less cost so that their product prices is also not much high. It will
be very effective for Carnival Corporation and Plc in gaining more and more customers which
will help them in increasing their profitability base as well. For this, the managers of the
company needs to effective and maximise and minimise the cost on the basis of needs of the
company.
Decision Making:- While taking important decisions for the company like about doing
budgets and allocating costs for the resources, so it is required that the company has to take
decisions about the cost allocation very carefully. So Carnival Corporation and Plc should make
sure that they take their decisions after doing research otherwise they may take wrong decision
that might decrease their productivity.
Improving performance of management: If Carnival Corporation and Plc is making use
of cost very wisely then they will be able to increase the performance of company by making use
of resources in limited manner. Thus, it is very effective in raising the performance if financial
management of the company.
Designing Financial Structure:
Several types of cost are involved in managing the financial resources of Carnival Corporation
and Plc dealing in travel and tourism sector. These are:
VOLUME - Carnival Corporation Plc is known for providing effective product and services to
its customers all around the world (Morrison, 2013). There are so many tools and techniques that
are available in market and are used by referred company to know the exact volume of travel

packages that will be required by the company to reach their break even point, EOQ etc. In short,
volume can be defined as expenses quantity which can be shown in monetary terms as well.
Significance of Volume
Break even analysis: It is a situation where every company wants to reach. This situation
is termed as a no profit and no loss situation where firm covers all the costs that they have spent
for making products or giving services to the company (Papatheodorou, Rosselló and Xiao,
2010). For companies like Carnival Corporation and Plc, it is very important for them to measure
their break-even point so that they can know that what position in the market is there and also to
perceive the period of cost as well.
Economies of scale – This is the type of cost that is saved by the company by increasing its level
of manufacturing. So, Carnival Corporation Plc will be able to save their cost by using this
economies of scale.
Diseconomies of scale- In this, when the economy of scale is not working in an appropriate
manner then it is termed as Diseconomies of scale. So, Carnival Corporation and Plc should
make sure that they don not indulge in any such situation that affect them in wrong manner.
1.2 Analyse of pricing methods used in travel and tourism sector
Carnival corporation and plc is a tourism company that is trying to make several types of
travelling as well as tourism packages to the customers. In order to take decision regarding
issuing prices of various tourism packages and which planning method should be used then the
tools and techniques that will be used are as follows :-
Rack Rates - These are the total amount that is used by the companies to elaborate their prices
without any kind of offers and discounts. Carnival Corporation and Plc can make use of this rate
by writing it on the broushers prepared by them to be given to the customers.
Seasonal pricing -During the whole year, there are so many types of seasons that come and go
and so is this case with visitors. They come in different seasons and visit different types of
places. So Carnival Corporation and Plc generally make the charge based on season so that the
customers do not face any kind of problem.
Last minute costing- These are the type of cost that has designed by the company so as to
calculate the cost occurred in last minute. Sometimes the customer’s plan gets cancelled and they
cancel their flight and thus in these types of cases companies like Carnival Corporation and Plc
are earning profits through the cancellation charges only (Nielsen and Spenceley, 2011).

Discounting - This method is connected with the discount factors that is put on by various
companies inside the company. In this Carnival Corporation and Plc provides discounts to
customers in order to attract the visitors. It is a very important to include this factor.
Package deals- It is a type of pricing strategy that is making use of various kinds of travel and
tourism companies. It is considered neither effective nor strong in the market. Carnival
Corporation and Plc is providing its travelling package at the minimum cost to consumers (Pike,
2012).
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.
Few pricing methods that can be used by the companies is given below:
COST BASED METHOD – - It is considered as the simplest way of determining profits
as here the fixed margin is attached with the company so that they can gain more and more
profits in an effective and efficient manner. It is normally considered as a simplest pricing
method and it is basically divided into two forms in which 1st one is Full cost Pricing in which
both fixed as well as variable cost is used and then % of mark-up is added. Another one is Direct
cost pricing in which only variable cost is considered. So, Carnival Corporation and Plc can
make use of this method as this is considered as a simplest method and will provide them more
benefits in tyerms of earning profits in the market.
Figure 1Cost based pricing model
DEMAND BASED METHOD – In this , normally the consumer’s demand is used to set
the prices of goods and services. It also includes factors like price skimming, price
discrimination and yield management etc. It can be considered as a particular pricing method that
helps in valuation of goods that are mostly considered in commerce. In case of Carnival
Corporation and Plc, if the demand is low as the customers are not visiting so the prices will also
be low and thus if the demand is high in the market then the prices will also go up. This is done
so as to earn more and ore profits.
VALUE BASED METHOD - It is an another method that is used to create a price. In
this. The seller keeps the price of the product on the basis of its value in the market. If the

product is made of high quality and valuable resources then its price will normally go high as its
production cost would also be high. So, in case of Carnival Corporation and Plc, prices are
decided as per the no. of visitors in a particular location. If the visitors will be more then the
products will be sold at high rate.
MARKET COMPETITION BASED METHOD - Here, in this method company can determine
its price on the basis of competition that is present at the market place for the company. They
should make sure that their prices are less as compared to their competitors because then only
they will be able to gain more profits and increase their customer’s base as well. In Carnival
Corporation and Plc, it is considered that if there is more sellers in the market then they are
required to be competitive with their pricing points so that the customers can be drawn towards
them. In case of tourism sector, since there are so many tour companies, so they can focus on
giving more facilities on affordable pricing so that the customers will not go to any other
company.
1.3 Analysis of different factors which influence profitability of travel and tourism
It is always essential that the business should implement good management strategies so
that they can conduct all their work operations in an effective as well as efficient manner. It is
the responsibility of managers to choose good management strategies only as then only it will be
beneficial for the company. So, good planning is always required to be done by Carnival
Corporation and Plc. The management should make sure that they include the staff members in
this process as well.
The activities that will be conducted related to advertisement and promotion should be done very
properly so that they make people aware about the kind of services they are offering in the
market. As per the current business environment, marketing planning is very important in
Carnival Corporation and Plc as it is very effective in increasing the profitability of company in
the market and making it big as well (Ritchie, Amaya Molinar and Frechtling, 2010). So, it is
required by the managers that they provide a display of all the expenses that are incurred y the
company. This will help them in analysing the profit in a corrective manner. These factors can be
divided into two parts :
INTERNAL FACTORS: In this following points are included :
 Cost of Production – It is a very factors that is having power to influence the travelling
sector. Its like if in Carnival Corporation and Plc the Cost of production will be high the

prices will be low and the case is vice versa as well. All these factors play a major role in
increasing the productivity of the organisation.
EXTERNAL FACTORS: In the factors that are included are like :-
 Economic Factors – In this those factors are included through which a strong impact is
made on Carnival Corporation and Plc. It includes –
o Government- The elements of government can be impact ion the profit of firm
like the cost of petrol.
o Currency rates- The rates of currency in every nation are dissimilar from one
another The currency rates are very much different from the profit level on the
basis of requirements of business. So, because of this Carnival Corporation & plc
company has many guests from the different countries and this is helpful in
increasing the profit of this company and making their image in front of whole
world as well.
 Social Factors – In this ,factors related to the culture and society is included like:
o Events- It can also have an impact on the profit level of Carnival Corporation and
Plc because of the different methods of pricing and the events attracts the people
to enjoy. It helps in increasing the profit of an organisation (Spenceley, 2012).
o Terrorism- If any place or any country is having any kind of fear of terrorism in
the country where Carnival Corporation and Plc is present then no citizen will like
to visit such country as there are so negativity at such places as fear of losing life
as well.
 Environmental Factors – These are the type of factors that impact the travelling sector in
a natural manner. It is like:
o SEASONS – There are so many tourists who only like to travel seasonally only
like during winter vacations or summer vacations etc, when the peak season
comes, normally Travel Company’s profit is at its peak. So, during that period
Carnival Cooperation Plc sends invitation to so many tourists for visiting a
particular place so that the profit level of companies gets enhanced. So, seasons
have a direct impact on the performance of the company related to travel and
tourism.

o Natural calamities- These are the kinds of disasters in which human does not
have any kind of control. If any kind of natural calamity is happening in localities where
Carnival Corporation and Plc is present then it will have a bad impact on the society as well as
on the tourists’ destinations as well because now tourists will not prefer to visit such place where
these kinds of activities can happen.
TASK 2
2.1 Different kind of management accounting information which used in tourism sector
Covered in PPT.
2.2 Utilisation of management accounting information as a decision-making tool
Covered in PPT.
TASK 3
3.1 Interpretation of financial accounts to assist decision-making
Dalata Hotel Company was established in the year of 2007. This hotel is a largest hotel
operator in United Kingdom. It has the four start hotel and in total hotels there are 7700 rooms.
Under this hotel large number of staff members are working and its revenue is high (Vogel,
2014). This hotel provides effective and better services to consumers in order to attract them or
make them loyal towards company. The financial performance of this company is good and it’s
developing day by day. Balance sheet of 2015 and 2016 year of this hotel are given below as
above: