Travel Reference
In-Depth Information
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Members - of private clubs and public sector
large public limited company (plc), on the other hand,
raises funds by selling shares in its business, in return
for which its shareholders expect a return on their
investment, known as a dividend.
organisations have a right to expect their
membership fees to be put to an appropriate use
and that those running the organisation do so with
their best interests at heart;
Most new or existing travel and tourism businesses
generally approach a bank fi rst when looking for
fi nance. All the banks offer a wide range of services
to new or expanding businesses, either through their
branch network or via the internet. Many banks have
small business advisers who give general business
advice and can provide useful publications on business
start-ups, business planning and legal aspects of
running a business. Banks usually want to see a fully-
costed business plan before considering an application
for funding.
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Taxpayers - private sector organisations are
expected to run their businesses in a professional
and responsible manner, making sure that the pay
their fair share of taxes and National Insurance
contributions. Travel and tourism organisations
operating in the public sector must make the best
use of the funding made available to them, securing
the best value for the taxpayer at all times.
Organisations such as Companies House, HM Revenue
& Customs, the Health and Safety Executive and the
Information Commissioner are set up to monitor the
affairs of all UK organisations, including those operating
in the travel and tourism sector.
The banks can offer a business:
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An overdraft - this is usually the cheapest way for
a business to borrow money and is used to meet
short-term fi nance needs when cash fl ow is tight;
Distribution of proi ts
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A loan - offered for periods ranging from up to three
years (short-term) to over ten years (long-term) and
used for purchasing new equipment, vehicles, etc.
The owners of travel and tourism organisations
operating as sole proprietors and partnerships can
keep any profi ts they make. The profi ts can be taken as
income by the proprietor(s), subject to any tax liability,
or 'ploughed back' into the business to help it develop
for the future. Profi ts from partnerships are normally
divided in equal proportions to each of the partners.
Profi ts from companies are distributed as dividends to
shareholders, based on the number of shares they hold
in the company. As an example, Thomas Cook paid its
shareholders 3.75 pence per share in May 2009 - so
somebody holding 1,000 shares in the company would
receive a dividend of £37.50. The rate of dividend paid
by a company tends to be higher when it is doing well
and lower when sales are poor. In 2010, British Airways
paid no dividend at all to its shareholders after poor
trading.
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A commercial mortgage - used for the purchase of
land and buildings for the business.
In all cases of loans and mortgages, the bank requires
security from the borrower in case repayments are not
met. This can take the form of deeds on a property or
insurance policies. Other types of funding for private
sector organisations include leasing and hire purchase,
where items such as vehicles and equipment are not
purchased outright.
Private sector travel and tourism companies can apply
to a variety of public sector organisations for fi nance,
in the form of a loan or a grant. Sources of fi nance
include the tourist boards, Regional Development
Agencies, local authorities and bodies such as the Arts
Council and English Heritage. Sponsorship can be an
important, if uncertain, source of income for some
commercial travel and tourism businesses, for example
Virgin currently sponsors a Formula One racing team
and Thomas Cook is a sponsor of the London 2012
Olympic and Paralympic Games. Both companies
hope to gain valuable media coverage for their brands,
leading to increased sales and profi tability.
Sources of i nance
The sources of fi nance for private sector travel and
tourism organisations often depend on the size of
the business and its legal identity. A sole proprietor,
for example, may start his or her business purely using
private savings or gifts from friends and relatives. A
