Delivery in day(s): 5
Diploma in Travel and Tourism Management
Unit Number and Title
Unit 2 Finance and Funding in Travel Tourism
Cost, profit, and volume are the considerable factors for that organisation operating in Tour and travel industry. This finance and funding in travel tourism assignment report explains importance of cost, profit and business volume of the business and significance of pricing policy for tour and travel organisation. This report also provides information regarding MIS and sources of funds for investment are available in the travel and tour industry.
Merlin Entertainments Plc is operating in travel and tourism sector in United Kingdom. It operates its business in three segments: Midway Attractions, LEGOLAND Parks and Resort theme park around 115 attractions in 23 countries of four continents. Cost, volume and profit from travel and tourism business are most important. These three factors are useful for making policy decisions for management.
Tour and Travel is one of the growing sectors of United Kingdom. For any business Cost, volume and profit these three factors are important. Companies operating in travel and tourism sector have to consider cost, business volume and profit margin in order to make strong strategies to stand in market in long run and expand its business at international level.
Cost: Cost includes all direct costs, indirect cost, fixed cost and variable cost incurred during business operations. Indirect cost includes arrangement of local bus service, making arrangement of tour guide etc. Direct cost includes expenses occurred regarding providing facilities and services to their customers related with accommodation or resort and theme park. Consideration of all the expenses management can frame plan to control the cost so that profit margin may increase (Harris, P. 2010).
Business Volume: Management should always consider the business volumes or peak seasons before strategic decision making. Travel and Tourism business is a kind of seasonal business. People plan their holidays during summer and winter vacations. Management should consider the business volume so that it can frame strategies for operational activities and make effective cost control.
Profit: Profits are the final results of operational activities held in the organisation. Considering the profit margins of past performance management can make more efforts in controlling cost and frame market strategies for expansion of market in order to increase profits. Whole business of tour and travel is dependent on profit. Higher profit helps in developments of business and also makes it economically strong.
There is huge competition in travel and tourism sector of UK. To remain in the race of competition and serve industry in long run Merlin Entertainment Plc should adopt some pricing methods in framing different tour packages for increasing customer’s attraction. Some pricing methods are as follows:
Competitors of Merlin entertainment Plc “GREVIN ET COMPAGNIE” adopt market led pricing method in deciding tour packages. Company may adopt one of the above explained pricing methods but before deciding pricing of the tour Packages Company should consider the factors influencing pricing such as change in seasonal variation, political environment, economic environment, social environment etc (Medlik, S. 2012).
Profit: Profit means financial gains earn in business from operational activities. Profit is the focal point for every business organisation. Like other industry there are many factors which affect the profit margin of “Merlin Entertainments Plc”. If profit is affected then it also affects the business of whole organisation. Influencing factors includes external and internal factors of organisation. These are as follows:
“Restaurant Group Plc” is operating in restaurant industry. Its business is spread in to 470 restaurants and pub restaurants all over. Frankie & Benny’s , Chiquito , Coast to Coast are the principle brand of company. Company has strong image and good financial conditions. Management Consultant firm focuses on travel and tourism business wants to make financial performance analysis of “Restaurant Group Plc” for the year ended 2015.
Table shows the terms from financial statement used in ratio analysis:
Amount in (£'000)
Long term fund
Operating cash flow
long term +short term funds
Ratio analysis of “The Restaurant Group Plc” of the year 2014 and 2015:
Gross profit margin
Operating profit margin
PBT or LBT/revenue
PAT or LAT/revenue
Return on capital
Gross profit/capital employed
Operating profit/capital employed
PBT or LBT/capital employed
PAT or LAT/capital employed
Operating cash flow
Cash flow/operating profit
Current assets/current liabilities
Long term debt ratio
Long term debt/Equity
Total debt ratio
Long term + Short term debt/ Equity
Interpretation of Financial Analysis: For analysis of financial performance of companies ratio analysis is used. Ratio analysis includes capital turnover, Profit margin ratio, Return on capital ratio, Operating capital ratio, current ratio and gearing ratio (Cartney, D. 2011).
Overall the financial performance of the company is good and company is financially sound. “The Restaurant Group Plc” is suitable option for making capital investment in project associated with travel and tourism because company is generating cash continuously (Velten, M. 2014).
The report explain in detail about the significance of cost, profit and business volume in tour and travel industry and different types of pricing method which travel and tour operator may adopt for designing tour package. The report also describes the tools of management accounting information used in decision making in tour and travel industry. This report also describes the financial analysis which helps in taking investment decisions in capital project and also describes various capital project associated with travel and tourism industry and help in growth and development of tourism sector’s organisations.
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Cartney, D. 2011, Strategic financial analysis & cashflow for company directors, Thomson Reuters, Pyrmont, N.S.W.
Fletcher, J. 2000;2002;, Encyclopedia of Tourism, Taylor & Francis, S.l.
Harris, P. 2010;1999;, Profit Planning, 2nd edn, Taylor and Francis, Jordan Hill.
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Langfield-Smith, K., Thorne, H., Smith, D.A. & Hilton, R.W. 2015, Management accounting: information for creating and managing value, 7e  edn, McGraw-Hill Education, North Ryde, N.S.W.
Medlik, S. 2012;2003;, Dictionary of Travel, Tourism and Hospitality, 3rd edn, Taylor and Francis, Jordan Hill.
Pezzullo, P.C. 2014;2007;, Toxic Tourism : Rhetorics of Pollution, Travel, and Environmental Justice, 2nd edn, University of Alabama Press, United States.
Pizam, A. & Mansfeld, Y. 1999, Consumer behavior in travel and tourism, Haworth Press, New York.