Unit 2: Finance and Funding in Travel and Tourism Sector

Introduction and background notes Assignment Context and Scenario:

For this assignment you will required to base your works on the case study company from the travel and tourism sector provided. The objectives of a company are to build around its customers and employees, and look for opportunities around the world to be recognised as a world class company. The travel and tourism firm provided wants to be highly valued by its customers and all other stakeholders in order to increase the value of the business. By providing the best quality of goods and services at the best possible competitive price, the company will be able to expand its business to the next level. This will not only enable the company to achieve competitive advantages, but will also serve the primary purpose of its shareholders.

The aim of the assignment is to provide an opportunity for the learners to examine the role of   finance and the   concepts of cost,   volume and profit;   use of management accounting information in decision making; interpreting the financial information, and the sources of finance in financial decision making in the travel and tourism sector.

You are required to complete the following four tasks in report format by using the financial statement provided by your lecturer. Use relevant theories and apply in context of the financial statement provided.

Total word limit is 3,000 words; your assignment should be at least 2,500 words in length, any calculation should shown in the appendix and the must not form part of the required number of words.

Tasks What you must do Grading Criteria
LO 1: Task 1

Analyse   and discuss the   methods of costing   and the concept   of cost, volume and profit in the travel and tourism industry using the given company as the example. Discuss how the business strategies are adopted in the travel and tourism sector using the case study example.

P1.1, P1.2, M 1, D 1 P1.3
Task 2 LO 2:

Analyse   the role of   management accounting information   as a decision making tool in your case study organisation and Identify and discuss the objectives of   a budget and   assess its importance   generally with special emphasis in the travel and tourism industry

P 2.1, P 2.2, M 2, D 2
LO 3: Task 3

Using   the financial statements   of the company   provided, interpret   the financial statements using appropriate   ratios for profitability, liquidity, efficiency, investment and insolvency.

Detailed calculations of specific and relevant financial values and ratios may be included as an appendix and must not form part of the required number of words.

P 3.1, M 3
LO 4: Task 4

Identify   appropriate sources of   finance for the   company to expand   its operations. Any   analysis must include advantages, disadvantages   and contrasts for each source of finance

Analyse each source of finance identified in Task 1 in detail and discuss its impact on   the financial statements with reference to   Income Statement, Statement of Financial Position and Statement of cash flows.

P 4.1, D 3
 
Learning outcomes Pass
LO1. Understand the importance of cost, volume and profit for management decision making in the travel and tourism 1.1  explain the importance of cost and volume in financial management of travel and tourism businesses 1.2   analyse pricing methods used in the travel and tourism sector 1.3   analyse factors including profit for travel tourism businesses
L02. Understand the use of management accounting information as a decision making tool in travel and tourism businesses 2.1   explain different types of management accounting information that could be used in travel and tourism businesses 2.2   assess the use of management accounting information as a decision making tool
LO3. Be able to interpret financial accounts to assist decision making in travel and tourism businesses 3.1 interpret travel and tourism financial accounts
LO4. Understand sources and distribution of funding for public and non-public tourism development 4.1 analyse sources and distribution of funding for the development of capital projects associated with tourism
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Managing Finance in Travel and Tourism Management

Task 1 Understand the importance of cost, volume and profit for management decision making in the travel and tourism

1.2 Analyse pricing methods used in the travel and tourism sector

Travel and tourism industry is growing rapidly in this fast changing world. Lots and lots of people are visiting different places, travelling world and are using Internet for making the bookings. This industry is important for all the countries because it brings the money and the development to the nations. It is important to make effective decisions for the business so that it can make sufficient profits and can take steps to expand the business in the future. (Clarke, 2012)

There is a huge requirement of the marketing principles for adopting the methods of pricing The price of the tourism business is decided according to the location, brand and star rating which are given to the accommodation facilities. The pricing policies play a very important role in setting up the prices so that the cost can be covered and the reasonable amount of profit can be earned. (Blumer, 2012)

The selling prices can be determined by adding the profit margin in the costs and the profit margin should be sufficient enough so that the business can grow and expand in the future. There are various pricing methods which can be used for setting the prices in the travel and tourism sector. (Armitage, 2010)

Market led Pricing: In this pricing method, the prices are set according to the Penetration pricing and Skimming pricing. Penetration pricing is the method where the prices are set at lower level so that more customers get attracted and the organisation can fight the tough competition in the market. Skimming pricing is the method where the organisation set higher prices because they are already at a good position in the market and they have the competitive advantage over the other firms.

Profit led pricing: there are two methods of pricing under this method- Competition pricing and pricing based on customers. In the method of competition pricing, the prices are set according to the prices of the competitors and the price method which is based on the customers is the method which set the prices according to the customer’s demands. (Blumer, 2012)

Return on the investment pricing: It is the method where the prices are determined according to the interest rate and returns on the investments.

Cost led pricing: In this pricing method, the prices are set according to the cost and volume of the business. The breakeven point is calculated so that the business can get sufficient profits on their investment on business and when any business sets its price above the breakeven point, it means that high level of profits are earned by the business. (Berk & Peter, 2011)

The profits of the business are managed when the pricing process is done effectively. Huge profits are earned if the pricing is done after keeping in mind the factors like cost, profit margin, breakeven point, etc.

References

Armitage, S. (2010). The cost of capital. New York:: Cambridge University Press. Berk, J., & Peter, D. (2011). “Corporate Finance”, 2nd ed.,. Boston.: Pearson,. Blumer, J. (2012). Pricing Strategy for Creatives. Published in Business , 1. Clarke, J. R. (2012). Marketing in Travel and Tourism. Routledge.  

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