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Finance and Funding in the Travel and Tourism Sector

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Introduction to Finance and Funding in the Tourism Sector

Travel and tourism management [TTM] is a crucial part of every country in which many types of services are provided to tourists. It is a holiday activity by which people go for relaxation with their family. Tourism and travel are two different things where travel is simply a movement on which people go for a journey by any transport such as train, bicycle, or airline and so on.

In this report, The Carib Happy Tours Company is a private entity that deals in summer holiday packages and different services. In which it’s provides a private charter only for its tourist guests and the company also focuses on accommodation arranged in hotels and aeroplanes for customers comfortability. CHTC charges £800 per tourist and the total cost for accommodation for 2 weeks is £60,000. In addition, CHTC evaluates CVP's importance in the decision-making process related to tourism. In this management accounting, financial accounting is considered in the context of TTM. Moreover, in these reports, proper analysing of the source of funds will assist in the development of the TT sector.

Task 1

A) Concept of CVP Analysis and Its Importance

Cost volume profit analysis is a proper analysis in which variable cost, fixed cost, selling price, and volume of sale are evaluated. It also assists in determining net income and operating income. For systematic analysis various assumptions can be performed such as production management, whether fixed and variable costs are constant or not, and many more. In the travel and tourism sector, CHTC evaluates the importance of cost and volume and they are as follows...

Contribution Margin

It is a margin percentage in which contribution is divided by the sales so that percentage will be found out. CHTC uses this term to find out the contribution margin in their holiday packages. For these following formula is used to find out the percentage.

CHTC Company has adopted a 40% margin in their holiday packages. It will assist with the set margins and also its effectiveness in total sales.

MOS

MOS stands for margin of safety and this is used in the travel-tourism sector to compute the total amount of sales after excluding break-even sales. It will assist in setting a high margin so that there is a low risk in the tourism sector. In other words, it is also a forecasting that expresses a safety margin for better sales in the future.

Break-Even Analysis

It is often called a sale mix in which the total selling parts are evaluated. CHTC has many holiday packages and all have different margins so the Company can use a sales mix in the calculation of total sales (Becker, 2016). BEP manages the balance between profit and loss and computes a point where no profit and loss is there. All the above points play a very important role in the travel and tourism sector for better consideration of budgets

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