Finance and Funding in Travel and Tourism Sector, BTEC Report

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, using Carnival PLC as a case study. It explores the significance of cost, volume, and profit, examining direct and indirect costs, and the importance of cost reduction and decision-making in financial management. The report delves into various pricing techniques, including cost-based, demand-based, and competition-oriented pricing, and analyzes factors influencing profit, such as seasonal variations and social factors. Furthermore, it includes an interpretation of financial statements from the Dalata Hotel Group and discusses sources and allocation of funds for capital projects within the industry. The report concludes with a summary of key findings and recommendations for effective financial management in the travel and tourism sector.

Finance and Funding in
Travel and Tourism sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Significance of cost and volume in financial management of T&T business..................1
1.2 Pricing techniques which are implemented in travel and tourism sector.........................3
1.3 Analysis of factors influencing profit for travel and tourism business............................5
TASK 2 ...........................................................................................................................................7
........................................................................................................................................................14
TASK 3..........................................................................................................................................18
3.1 Interpretation of financial statements and accounts of Dalata hotel group....................18
TASK 4..........................................................................................................................................19
4.1 Sources and allocation of funds for the development of capital projects.......................19
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................23

INTRODUCTION
Finance is a backbone of every business which enables in most of the work which get
done by an organisation. Although, whenever an association wants to introduce another project
they need to arrange some fund so that suitable actions for future growth could be manage
(Adiyia and et. al., 2015). This project is based on finance and funding in travel and tourism
sector by considering example of Carnival Plc London. In this report some major concepts get
included out of which first is to understand the importance of cost, volume and profit for a
company in order to maintain effective operations. Along with this, it will also depicts about use
of management accounting process so that better and effective decision making could be
promoted in order to maintain effectiveness and efficiency in working projects. Moreover,
business managers need to interpret financial accounts properly and in a suitable frame as well so
the future oriented process lead to facilitate. Thus, management will going to evaluate various
sources of funding as well by considering public and non public source of finance.
TASK 1
1.1 Significance of cost and volume in financial management of T&T business
Carnival corporation Plc: This organisation is a biggest leisure travel firm and they are
operating their business in many locations (Airey and et. al., 2015). Like, North America, Europe
and many others. They are dealing in more than 10 global cruise line brands. Their main duty is
to enhance number of tourist by motivating them to visit many attractive places. They will come
from different nations with distinctive aim. If number of guest increased then, this will assist in
improvisation of revenues of that country. It has been evaluated that, in present era, business of
travel and tourist is much profitable as well as advantageous. Additionally, various guests come
to another places to see heritage and cultural places. Henceforth, there are some factors which is
connected with the travel and tourism sector. These are mentioned as beneath:
Cost: It will incur in financial terms which is related to the tour package. Whenever
planning regarding tour is doing, it is required for people to keep in mind the cost of tour
package (Buckley and et. al., 2015). There are various cost get incur on a project which need to
understand by Carnival corporation Plc so that they are going to determine various aspects in a
better and suitable manner stated as follow:
 Direct cost: Carnival PLC have 10 global cruise where quality services get deliver
to ultimate users. In the packages of a company they include all kind of
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consideration which directly incur at the time of visit. This facilitate and reflect
direct cost on working so that chances of better and suitable satisfaction of users
become possible due to paying for such element which directly reflect at the time
of consuming services.
 Indirect cost: These are such kind of value which did not have any relation but
still included in the rate of a product and services. Carnival Plc need to estimated
about indirect cost of their package which reflect at their cruise lines. Thus,
management need to determine this section because might it will create a feeling
of dissatisfaction in various individual.
Volume: This is basically term as expenditure and services quantity which is presented in
the term of finance. Along with, this is fundamentally associated with the entire ticket quantity
which is purchased by staff members from Carnival organisation.
Importance of costs:
This is a most critical facet in sector of travel and tourism. It has been evaluated that their
sustainability as well as development is highly associated with cost which is occurred in a
particular year. Therefore, it is required for manager of firm to create a proper planning so that
they will easily reduce circumstances of losses and in addition mistakes (Castaño-Isaza and et.
al., 2015). It has been noted that, employer of tour operator always try to improve their profits.
For above stated aim, some strategies and policies will formulated by them so that they will
easily sell out maximum package of tours at the time of season. Cost reduction: This is an important element which need to be considered by each sort of
association. In context of Carnival corporation plc, they are providing economical tour
services; therefore, they will be able to decrease unwanted cost. As a result, firm will
keep up their profits as well as efficiency in an appropriate manner. Decision making: It is foremost component for unit finance division. They have to take
an adequate judgement so that they will be able to maintain their goodwill at
marketplace. If they are having proper fund then, they will be easily keep up
sustainability at marker (Guttentag, 2015). Increasing performance of managers: If an enterprise is able to reduce their unnecessary
cost then it leads in improvisation of revenues. Along with, they will be able to enlarge
their business activities effectually.
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Importance of volume: BEP analysis: This type of process is utilized to identify the recent position of business at
marketplace. It has been evaluated that, this is associated with entire cost as well as
expenditures which will occur to balance their business exercises. Therefore, Carnival
organisation is trying to develop a plan so that some cost will be covered which is
invested by an association. Economical of scale: This is basically connected with cost advantages which is occur to
enhance outcomes of goods as well as services (Hingtgen and et. al., 2015). Additionally,
this will aid an enterprise so that they will overcome variable cost per unit due to
operational synergies and in addition synergies.
 Diseconomies of scale: In this phase, company is not operating their activities
economically. It will develop if business size get enhanced.
1.2 Pricing techniques which are implemented in travel and tourism sector
It is required for each business sector to identify those individuals who will travel to
another places without any problem (Hjalager, 2015). For above stated aim, many type of tour
packages will offered by tour operators so that they will assist them to plan their trips in an
appropriate way. There are some individuals who are much sensitive regarding price; therefore,
they will choose those services which are advantageous for them for maximum time duration.
This is also called as identical methods due yo huge range of schemes as well as plans.
Company will segment their market as per the needs and wants of individuals; thus, they
will be able to accomplish it within requisite period of time. It has been evaluated that prices will
alter as per demands of people. Hence, it is fundamental for an association to modify their prices
as per time or circumstances. So that they will be able to provide best and effective packages to
people. They have to provide best price to them as this will assist to attract many persons
towards them (Loh, 2015). Demand of each customer will different, like some wants to visit
heritage places but youngsters want adventurous trips. Route of trip needs to be appropriate
which help to provide more satisfaction to clients adequately. If it is memorable as well as
enjoyable then, individuals will visit to that place many times. Henceforth, there are certain
pricing techniques or methods will be used by company to acquire attention of persons. These
are discussed as below:
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Cost based pricing: This is considered as most easy way to identify plan and cost which
is associated with this. It will be classified into many sectors which are mentioned as beneath:
 Full cost pricing: It is connected with collaboration of fixed cost as well as variable cost.
 Direct cost pricing: It is related with variable expenditure plus total markup percentage.
 Cost plus pricing: This kind of tool is using by carnival firm so that they will be able to
improve their profits in an effective manner (Lunt, Horsfall and Hanefeld, 2016).
 Skimming pricing: If firm is utilizing this methodology, then they charge higher amount
from customers at initial phase. This kind of method is embraced by high class of
individuals. Such as, food, international stay and so on.
 Penetration pricing: As per this, organisation is providing package to their clients at less
cost as compare to their rivals. Thus, they will compete them at marketplace effectually.
For this, some type of techniques will be utilized by them: discounts, coupon and other
advantages.
Demand based pricing: Price of tour package is highly depend on requirements as well
as demand of clients and in addition plan supply (Sawyer, 2015). Nature of this pricing is much
real.
Competition oriented pricing: This type of pricing is also known as market oriented
pricing. It is basically related to those value which is charged by the rivals. Under this, they
never consider needs and wants of customers as they only want to improve their profits and beat
contenders at marketplace. It will be divided into many parts, such as:
◦ Premium pricing
◦ Parity pricing
◦ Discounted pricing
Product line pricing: This is much related with provided package and will be connected
to other (Shahbaz and et. al., 2017). It has been analysed that cost of planning related to tour will
differ from another firms. This is basically determined with revenues which an association wants
to gain. Like an example:
Destination Cost (In pound)
Domestic Region 95
National 260
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International 540
Seasonal pricing: Prices is charged by Carnival corporation according to the season from
their clients. It can be understand through below description: Summer pricing: During this season, numerous persons want to visit other destinations so
that they will get relaxed. At this time, firm is basically charged higher prices from the
customers. Along with, to acquire attention of people they will offer some discounts to
them also (Tolkach and King, 2015).
 Winter pricing: As indicated by this, if temperature is high of country then, this will
reduce circumstances travel of persons. But there are some individuals who want to visit
other destinations during this season. Thus, price of package will depend on this.
1.3 Analysis of factors influencing profit for travel and tourism business
It is essential for company to use best and effective marketing activities as this will assist
them in improvisation of revenues. With help of these method they will gain attention of
numerous clients towards them (Tribe, 2015). As there are many people who visit distinctive
places with the aim of distinguish aims will help country and local businesses to improve their
revenues. Many types of heritage places will get attention of many persons towards them. Rather
than, some creative methods are using by companies to advertise about the places of country
which will assist to pull attention of guests towards them. Henceforth, there are some elements
which will provide influence to sector of travel and tourism:
Seasonal variations: During the peak season number of visitors are usually high as
compared to off season (Vanhove, 2017Veal, 2017). It is essential to underpin and determine the
seasonal variation by Carnival Plc on their cruise lines. Although, currently they take over a tour
operator company on which seasonal variation reflect most impact. At the time of season their
profit margin tend to rises or vice versa. Hence, management need to understand this section
properly because it ultimately influence profit margin of a company.
Social factor: Another major element which reflect and influence profit or travel and
tourism company is social aspect (Adiyia and et. al., 2015). in a society diverse range of
individual are living whom significance towards society also get vary. Carnival Plc need to
understand the social aspect properly and deliver quality products to customers as well as need to
fulfil all duties and responsibilities towards society which enable them to generate more profit
and enhance production as well.
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Government support: Organisation expansion and prosperity confide upon guidance of
government bodies. They provide finance support to travel agencies so that they are able to
enhance number of visitors. As a result, this industry help in improving state of economy by
contributing adequate funds. These are forces which eliminate proposition of difficult situations
by specifying rules and regulations to tourists about their sites. Government had also organised
various marketing campaigns, travel and development plans, regional and rural awareness to
promote rural tourism sector. They even pass budgets and bills through which they are able to
sustain and expand this industry through which nation status is also improved.
Travelling trends: In every country there are different culture, traditions and trends,
which distinguish as diverse people are living. As in United states, there is composition of
various trends and customs. This country's culture is western; so they are able to attract large
number of visitors (Airey and et. al., 2015). This had benefit travel and tourism agencies to
generate adequate profit through which they are able to improve functionality of system by
adding various services. Carnival Corporation plc have constructed themes and structures which
depict ethical and tradition cultures of US. They also comprise luxurious ships and cruise which
provide superior and royal experience to tourists. Travel trends are also influenced by marketing
strategies used by them and thereby this affect their amount of revenue which they are able to
earn from their business.
Locations and destinations: This help country' government to earn good amount of profit
so that they are able to improve state of economy. They support organisation which are dealing
in travel and tourism industry by providing them various benefits such as tax concessions to
promote destinations and heritage sites (Buckley and et. al., 2015). Hollywood industry,
luxurious hotels, museums, casinos and so on are various places which fascinate people to travel
to different locations. Mostly individuals choose to go in adventurous stations and western
culture. Besides this certain spots are prominent as they are used for royal weddings, events and
meetings.
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TASK 2
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