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Matakuliah : G1174/Tourism Management and Planning
Tahun
: 2007
Financial management in managing a destination
Pertemuan 21-22
Topics
• Main issues relating to financial management
• Technical aspect of financial management
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Objectives
1. To recognize the need of financial aspect in managing a destination
2. To identify the issues on financial management especially
investment concern
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What is a financial management?
• For most organisation, financial is rephrased as profit, but in broad
sense, financial is concerned with ensuring funding available for
day-to-day operation of a tourism destination.
• The term of financial management is an umbrella phrase which
consists of management function as
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–
–
–
–
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Financial planning
Financial control
Management accounting
Cost accounting
Financial report
Stakeholder financial management
•
•
•
Shareholder & owner
– dividen, kegiatan usaha masa
lampau & jaminan keuangan masa
depan
Lenders & capital market
– bunga & pengembalian modal
Employees (staff)
– keuntungan perusahaan
•
•
•
•
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Financial Advisors
– untuk analisa & prediksi kegiatan
ekonomi – pendapatan & arus kas
Commercial Parties = customer,
supplier, competitors (takeover atau
merge)
Government
– pajak & statistik
The Public
Financial management objectives
Private
Public
Profit, enough income to cover cost and
crease surplus
Liquidity, enough income to pay the bills
Achieving the highest possible price for
the product to maximise revenue
To charge a price that socially and
politically acceptable
Forcing costs down to the lowest possible Cost reduction through efficiency
level
operation
Maximise utilisation providing it is
profitable used of the resources
Maximising utilisation within resource
constraint
Meeting financial targets
Living within the budget
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The need of financial in a destination management
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Budgeting
•
The main framework in financial management is budget and it can
be used as
–
–
–
•
Guide everyday financial management
A basis for evaluting performance and taking decision on corrective action
Impression for stakeholder
Two types of budgets:
1. Capital budget - concerned with investment
2. Revenue budget – cover expenditure and income
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Capital budget
• Internal
– Retained profit
– Accummulation depreciation
• External
– Additional share capital
• Stock exchange quotation
• Right issues
• Merchant bank placing
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• External
– Additional debt capital
• Bank overdraft
• Leasing
• Loan
• Mortgage
• Factoring
• Sale & lease back
• Hire purchase
• Commercial paper
– Capital management
Revenue budget on a tourism destination
Income
• Entrance fee
• Extra income from onsite attraction and
rides
• F&B operation
• Souvenir and other shop sales
• Meeting room rental
• Accommodation rental
• Car hire
• Guided tours
• Rent and tenancies
• Franchise and concession
• Grant
• Sponsorships, etc
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Expenditure
• Salaries
• Operational cost i.e. staffs’ benefits
• Training
• Recruitment
• Purchase of goods for sale
• Equipment
• Services i.e. cleaning services
• Transport
• Marketing
• Maintenance
• Administration
• Licenses
• Depreciation, etc.
Problems with budgeting at destination and
attraction
• Budgeting is based on the past experience whilst tourism is a
dynamic activity which can not re-run the past
• Tourism market is volatile, depends on seasonality
• Many factors influence tourism activities that beyond control of
budgeting
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Profit maximisation
Revenue generation + Cost control and reduction
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Revenue generation
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•
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•
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Attracting more visitors
Pricing
Increasing visitor expenditure
The use of destination and attraction by corporate user
Obtaining revenue from other sources
Attracting more visitor
• Increase promotional activities
• Using sales promotion
• Arranging special events
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Pricing
• Reduce entrance fee in low season and double up ticket in high
season
• Offering concession, group rate and discount
• Using family tickets
• Enchancing ‘value for money’ i.e. Buy 2 Get 1
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Increase visitor expenditure
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•
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Selection of shops
Variety of F&B outlets
Range of accommodation
Various tour package and tour gadgets
Obtaining revenue from other source
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Rents and tenancies
Franchises and licenses
Consultancy services
Grant
Sponsorship
Cost control and reduction
• Staffing – increase productivity, reduce number of staffs
• Good purchased – bulk buying, get best possible price, bought on a
‘sale or return’ basis
• Just in time delivery
• Delaying the payment of suppliers
• Tackle the cost of communication
• Reduce cost of utility – energy conservation and zero defect
• Sell off unproductive assets
• Leasing
• Contracting out and outsourcing
• Rescheduling loan payment
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Conclusion
• Financial management is at the core of all destination strategy
• Most of all, profit is the key issues although other implication need
to be obtain.
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