Case Introduction

Problem opportunities / challenge identification / dilemma

Main facts and events of the core study

Research and analysis of the situation

Formulation of solutions / answers

Discussion and selection of solutions / answers

Referencing

,

This case was written by ______from class of Cases in Finance leaded by Professor _____.

Tourism Company Finance Hilton Hotels

Monday, April 26, 2021

Abstract

Tourism started way before all the technology before airplanes and cars. It started with basic needs. They are looking for food and water, for instance. Nomads, even though tourism is not their purpose, traveling and not having a fixed home can look like a type of tourism, nowadays people instead travel and do tourism than being home.

Getting to meet new cultures and beliefs, look at new sights are part of a touristic journey and together, comes to the money invested on it.

Tourism is one of the world’s major economic sectors. It is the third-largest export category, after fuels and chemicals, and in 2019 accounted for 7% of global trade and is also highly affected by Covid 19.

This case aims to provide an insight into how tourism enterprises are and will be affected by covid 19 in the economy. It will illustrate the benefits of tourism and what to expect after being highly affected by the pandemic.

Key words: Tourism, economy and enterprises

TOURISM COMPANY FINANCE

10

Introduction

According to United Nations World Tourism Organization (UNWTO), 1.4 billion people traveled to international locations in 2018. The research results conducted 68 years before estimates only 25 million people traveled to international locations.

Due to Covid 19, this number dropped. Companies all around the world are suffering from a lack of tourism. For this Case Study we will focus on Hilton Hotels one of the hotel chains that has branches globally. The financial report focuses on Income Statements and shows a summary of the cash flow and the difference in the financial records because of Covid 19.

COVID 19 has had adverse effects on the economy of most countries, especially in the tourism sector. The economies of scale show a change of the supply and demand curve where the supply is more than the demand. Several countries depend on tourism to improve the economy and contribute to the country's GDP. Tourism is the third-largest income generating in most countries, and the pandemic has affected the industry globally (Bakar et al, 2020).

Problem Situation

The pandemic caused an immediate halt to the economic activity and functions in the industry. The tourism industry is among the industries that have the most adverse effects because of the pandemic, with the significant effect being the loss of jobs due to redundancy. Tourism sectors such as hotels, airlines because of the reduced number of clients. The loss of clientele is contributed by the lockdown and cessation of movements, hence making people stay indoors and making their food at home instead of eating out in hotels and restaurants. The industry depends on clients who bring revenue; hence, revenue loss means no income to the employees. Most of the tourism facilities are private companies that do not have the government's support; hence, this means that the government cannot cushion the businesses as they wait to recover. Most of

the managers did not have other plans or alternatives on sustaining their financial obligations apart from an immediate reaction to stop employees from carrying out their roles because of the possibility of lack of income. The loss of livelihood by the people working and depending on tourism has increased at an all-time high in the last year due to the adverse effects from the COVID 19.

The travel ban placed by various countries means that there is a limitation of tourists from different countries. The pandemic hit worse in the European countries, which affected the economy in Europe and had a ripple effect in developing countries in Africa that highly depend on foreign tourists to boost their economy (Bakar et al, 2020).

There is an effect in finance because companies have resulted to increasing on their expenses to comply with the regulations set by the government in the countries. The employee's safety is vital in sustaining their health. as a measure to protect the staff members and clients, the management needed to install and implement hygiene points in various sections of the business such as hotels and restaurants. Despite the costs incurred installing the safety measures, the businesses in the tourism industry and not in a position to increase the client's prices because of the low demand from clients (Bakar et al, 2020). Therefore, the financial reports show an increase in the loss is contributed by cost increase and reduced prices as a way of attracting clients. An additional cost incurred, such as an increase in furniture to cater for clients and allowing for social distance, means that most of the tourists' sector was affected by the installation and implementation. For example, a restaurant with a sitting capacity of 30 people meant reducing the number of sitting capacity due to the issue of social distance (Bakar et al, 2020).

Some of the tourist sector investments, such as hotels and restaurants, are owned by foreign investors. Due to the adverse effects caused by the pandemic, most of the investors resulted in disposing of their investments as a risk mitigation strategy and avoiding losses in the future. Some investors experienced the challenges of raising capital to resume the business or reinvest when the curve began to flatten because of the increase in financial institutions' restrictions (Bakar et al, 2020).

The increase in the rate of infection affects the performance of work for employees. A reported case of a single person results in the closure of a facility to stop the spread of the virus. If there is an instance an employee contract the virus, the facility may have an option to close for a duration that costs the business revenue during the downtime. Employees spend money on their treatment in the case where health insurance does not apply. The cost of treatment is high, and this reduces the purchasing power for an individual. In the case of a potential client, tourism is considered a luxury item; hence when a person does not have the purchasing power, they automatically do away with the luxury items (Bakar et al, 2020).

The economic projection of the drop in revenues is likely to continue because of the lack of employment from many sectors due to the pandemic's adverse effects. In some cases, some affected industries may choose to forgo taking a holiday in the next two to three years as a way of trying to recover their finances (Williams et al, 2021).

The productivity in some countries in Europe and America depends on seasons. In summer, most people take breaks and are more productive in other seasons, including winter. The COVID 19 reported cases in several European countries reached the peak from March to August, during which Summer falls in between these months. The tourism sector was highly affected in 2020 during these months because it is the norm to take a break and visit tourist

destinations in their home countries or foreign countries. There was a limitation of movement for most people due to lockdowns and cessation to stop the virus's spread. There was a low probability of recovery in the tourist peak seasons. Most potential customers resolved to keep their money in case of an emergency or resulting from different waves or strains of the disease (Williams et al, 2021).

Cash Flow Statement

</t

Collepals.com Plagiarism Free Papers

Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.

Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS

Why Hire Collepals.com writers to do your paper?

Quality- We are experienced and have access to ample research materials.

We write plagiarism Free Content

Confidential- We never share or sell your personal information to third parties.

Support-Chat with us today! We are always waiting to answer all your questions.

All Rights Reserved Terms and Conditions
College pals.com Privacy Policy 2010-2018