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Finance and Funding in The Travel and Tourism Sector- Dalata Hotel Group

University: UKcbc College London

  • Unit No: 3
  • Level: Diploma
  • Pages: 18
  • Words: 4500
  • Paper Type: Assignment
  • Course Code:

    BUS020N532A

  • Country: UK
  • Downloads: 0
Question :

An analysis is drawn in order to understand process of decision making along with Importance of cost volume profit within decision making. 

  • Understanding of significance of cost, volume and profit within decision making of tourism industry.
  • Understanding use of management accounting information within decision making of tourism industry.
  • Interpretation of financial accounts in decision making of tourism industry.
Answer :
Organization Selected : Dalata Hotel Group

INTRODUCTION

Funding can be considered as an act of delivering financial resources, which is often defined as money form or other time and effort value to need of finance, program and project, often through the company. These are the essential factors of an organisation which assists in performing actions and activities within a company along with managing its growth in more productive manner (Ambrosie, 2015). A company mainly focus over earning more and more benefits. But in order to functions business, suitable financial resources are essential for a company to meet the company's demand. This aid in fulfilling entire operations activities requirement which require proper investment after which executive may need ROI which they can conduct. This report will analyse the financial division at both micro and macro environment which has been enclosed in this report. Individual growth also comprehended in the sector of travel and tourism sector. The report will also evaluate the management of Dalata Hotel Group Plc to assist the decision making in the business. This is fundamental to consider the distribution and manage sources of funding non-public and public tourism development to achieve the outcome.

TASK 1

1.1 Importance of cost and volume in financial administration of tour & travel business

Carnival corporation Plc: The company is one of leading and largest travel agency in the competitive marketplace. The organisation is functioning their business operation across the world. Management are constantly working over the enhancement of business operations among all countries. Company is operating business mainly in Australia, N. America, Europe and other nations (Becker, 2016). This is essential for Carnival Plc to manage and understand basic financial activities and essentials in order to achieve require outcome. Here are mentioned some of those as below:

Cost: Cost can be referred as the paid and provided amount for purchasing and getting some certain element. This is often a monetary valuation of material, effort, time and consumer utilities and incurred risk etc. Here are mentioned some essential cost forms discussed beneath:

  • Fixed Cost: This can be referred as the cost which does not vary when the changes in output quantity incur. This is the essential part of the calculation and projection of benefits of break even analysis for the project of business. Fixed cost is often considered more meaningful for companies within the commercial as well as travel and tourism industry. For example: administration cost, infrastructure and rent cost, turnover etc.
  • Direct Cost: direct cost refer to those expenses which an organisation can conveniently link with certain 'object cost' that can be a project, department or product. Mainly this sort of costs are variable costs (Benson and Henderson, 2011). This is fundamental for Carnival Plc which facilitates compilation of benefits-designing data that has developed the cost division. Numerous components are considered in this category such as as direct labour, materials.
  • Indirect Cost: This sort of cost go beyond to the expenses interlinked with the creation of certain service to involve the management of price of whole organisation. The material supplies require for this enterprise everyday which can be considered as the example of indirect cost. This is significant to analyse in Carnival's operations as it reduce unnecessary costs from the pool of indirect costs of services. It also refine the indirect cost approach helping organisation in growth and development of their practices in more efficient manner.
  • Variable Cost: As per the manufacturing cost changes, the variable cost varies within the company. Carnival Plc consider this approach as one of the essential techniques as this consist of direct associated costs such as raw material.
  • Break-even Analysis: Carnival Plc opt the break-even analysis procedure which is considered as the analytical study techniques of cost-volume-profits relationship as well as setting the revenues and cost point agree on the exact term (Chatziantoniou and et. al., 2013). This is important aspect as it is most simplest technique in business that set whether the covered charges of services and products are covering the expenses and actual service cost. Break-even point is associated with fixed cost amount which shapes the offerings require to sell.
  • Economies of scale: When an organisation avail their output, the expenses of product reduce due to numerous components such as allocation of fixed cost. It is essential term in order to gain more competitive edge. It can assist in reducing the variable cost per unit due to the efficiencies of operation and synergies.
  • Diseconomies of scale: This take place when an organisation develop so widely that the price per unit can gain. It often take place when a company's the economies of scale does not function within an enterprise. Despite of experience continuous increasing output and decreasing cost, a firm comprehend a marginal cost increase with the increment in output. For e.g. diseconomies of scale is the opposite of economies of scale. By this it means that after a certain level extra purchases will not result in reduction of price per unit. Costs continue to rise after this level.

Hence the above mentioned are the essential components of cost which are often optimised and managed by Carnival Plc to achieve their determined business operations and outcome in more significant manner. Each element has their own benefits and advantages which is need to be managed for attaining the set outcome in more significant manner.

1.2 Pricing methods

Travel and tourism sector has been contributing a huge part in the development and operation of the entire country delivering major involvement in its economical gain. Hence, the business operators in this industry are emerging their business each and every day (Tourism information centre of Paris, 2017). Carnival Plc is the largest leisure and travel tour and cruise organisation which has a combined fleet on more than 100 vessels across more than 10 cruise brands lines. The company provide more quality services at affordable cost rates. There are several dimension of setting the services and products cost in which some are discussed as below:

Cost-led Pricing: This is a costing method in which a determined percentage and sum of entire cost is included to the product cost to reach at their selling cost. This consist of calculation of product cost and then adding a mark-up percentage to set the cost. This is one easiest way to measure what service should be costed at in travel and tourism sector. This is assisting method when it comes to increasing their benefit amount. This refer to the method of costing in which some desired margin percentage is valued and added to the commodity cost to obtain the determined cost.

Market-led Pricing: In this method of pricing, the cost are set on the condition of current market. This strategy is oriented toward market compare similar services which is being offered in the marketplace. On the grounds of competitor's products and overall quality of own service, the cost is being set by the organisation (Chio, 2014). As Carnival Plc has a global recognition, the company may vary their cost to compete their cost relatively to their rivals. This consider demands of service, price sensitivity in market and service life-cycle to accomplish the set outcome in significant manner.

Cost-plus pricing: It can be defined as the cost-based techniques for determining the services and products cost. In this method, one add direct cost of material, labour cost and product overhead cost together as well as add to their percentage markup in regard of deriving the product cost. This is often carried out in the travel and tourism sector while developing a contract of consumer where they reimburses merchandiser for entire incurred cost along with negotiating benefits in regard of incurred cost.

? Rate Pricing: This method implies within a company in which they determine commodity cost as per the prevailed trends in the global trends. Hence, the strategy of costing is being adopted through the organisation which can be equivalent to other enterprise. However, the set costs of services by leaders are complied by entire commercial market in travel and tourism sector. Hence, this pricing technique has its own existence in competitive market.

Setting effective cost of services in travel and tourism industry is a complicated task for numerous other enterprise. Few times, the organisation experience major imbalance in the management strategies of costing due to the loss experience (Wang, Xiang and Fesenmaier, 2016) . By utilising these costing techniques, the organisation can achieve those revenues. Above mentioned are some effective strategies of pricing in regard of maintaining the cost techniques of enterprise in more efficient manner. Carnival Plc, whereas, utilise the cost-led and market-led pricing methods majorly in order to deliver and trade their services in the competitive marketplace.

1.3 Analysis of different factors which influence profitability of travel and tourism

Benefit is emerging in the travel and tourism sector each and every day that is utilised through supplier, destination and companies in travel organisation to encourage ad achieve people to visit and go to certain places. There can be numerous distinct factors identified in the travel and tourism sector that influence the operation organised by the businesses in travel and tourism sector as well as aid in achieving business objectives. In the political support of United Kingdom, social culture, economical health and several other components exists in marketplace which are affecting the high profitability impact. Here are mentioned some of those designated elements mentioned as beneath:

Travel Trends: Travelling can be considered as an activity which develop each and evert year setting the requirement of market and methods through which service should be traded. Destination trends, services and commodities cost trends and many other activities trending in this sector shapes the activities of finance and funding in travel and tourism segment. Trends are formed through surveys in tourism and travel media which are monitored through marketing practices coordinated in this segments. Hence, current trends influence benefits in negative and more positive manner in the sector of travel and tourism as well as Carnival Plc's.

Economic environment: Brexit has affect the operations and economical condition of United Kingdom more negatively (Evans, Stonehouse and Campbell, 2012). Though country have covered the damage and trying to promote their tourism sector as this can lead to more economical benefits to the organisation. On the other hand, people as are more inclined toward such activities and leisure experience, this is promoting and benefiting the economical condition of organisation as well. Hence, the economical factors are creating more positive influence on the profit of Carnival Corporation & Plc.

Social Environment: Social environment of certain place has the power to influence organisation's operation and tourism activities in both negative and positive manner accordingly. Entire trends of market is changing and despite of more road trips, interest of people are more inclining toward leisure experience and cruise trip to have fun. Such sort of alternation in the incorporated culture can create more positive changes in the profits state of Carnival Co. & Plc leading the whole organisation to certain increment in the benefits amount.

Political Environment: This is one of the fundamental factors which can influence the company's services and country's tourism in negative and positive manner. State are considered as only support in funding of travel and tourism activities. The produced budget of government are straightly associated with the revenues and benefits of tourism segments. In United Kingdom, the major incident of Brexit create more negative influence on the firm's profitability who are smoothly functioning the business in this segment. The essential income amount of Carnival Co. & Plc that operate from Britain.

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