1.

The market share of the travel agency

Returns from the trips organized by the agency

Cp of the agency = 100
Returns from tourism in A country

Returns from the trips organized by the agency

Cp of the agency = 100
Returns from in-coming operations in A country

Resolved problem

The returns gathered from tourism, recorded in country A in 2015 are of 850 million u.m. The
in-coming operations represented 105 million u.m. The Blue Travel agency in B country
organized trips for the citizens in this country (out-going), for the destination of A country,
amounting to 36 million u.m. in 2015. If in 2016 the overall returns gathered from tourism in
A country increased by 10%, the returns gathered from the trips organized by the Blue
Travel agency increased by 5%, and the overall amount of the in-coming operation in A
country decreased by 5%, determine the market shares as overall market and overall in-
coming of A country, of Blue Travel agency in 2015 and 2016.

Solution

a) The market share of Blue Travel agency in 2006

The market share related to the overall travel market of A country

Returns from the trips organized by the agency

Cp Blue travel agency = 100
Returns from tourism in A country

36 mill.
Cp Blue travel agency 2015 = 100
850 mill.

Cp Blue travel agency 2015 = 4.235%

The market share related to the overall in-coming operations of A country

Returns from the trips organized by the agency
Cp Blue travel agency = 100
Returns from in-coming operations in A country

36 mill.
Cp Blue travel agency 2016 = 100
105 mill.

Cp Blue travel agency 2016 = 34.285%

b) The market share of Blue Travel agency in 2016

Returns from the trips organized by the agency

Cp Blue travel agency = 100
Returns from tourism in A country
Returns gathered from the trips organized by Blue Travel agency in 2016:
36 mill. u.m. + (5% 36 mill. u.m.) = 36 mill. u.m. + 1.8 mil. u.m. =
= 37.8 mil. u.m.

Returns gathered from tourism in A country, in 2016:

850 mill.u.m. + (10% 850 mill.u.m.) = 850 mill. u.m. + 85 mill. u.m. =
= 935 mill. u.m.

37.8 mill.
Cp Blue travel agency 2016 = 100 = 4,042%
935 mill.

Returns from the trips organized by the agency

Cp Blue travel agency = 100
Returns from in-coming operations in A country

Returns gathered from the trips organized by Blue Travel agency in 2016: 37.8 million u.m.
Returns gathered from in-coming operations in A country in 2016:
105 mill.u.m. (5% 105 mill. u.m.) = 105 mill.u.m. 5.25 mill.u.m. =
= 99.75 mill.u.m.

37.8 mill.
Cp Blue travel agency 2016 = 100 = 37.894%
99.75 mill.
 2. Average receipt by tourist and average expense by tourist

Resolved problem

Establish the average receipt by tourist and the average expense by tourist for Poland during
2015 given that:
Total receipts collected from tourism amounted 6 billion USD;
Tourist arrivals amounted 16 billion tourists;
Total expenses for tourism amounted 5 billion USD;
Tourist departures amounted 12 billion tourists.

Solution

Rt
Rt , where Rt = average receipt by tourist
N t , arrived
Rt = total receipts
N t , arrived = total number of arrived tourists

6 billion USD
Rt 375 USD / tourist
16 mill. tourists

Et
Et , where Et = average expense by tourist
N t , left = total expenses
Et
N t , left = total number of tourists who left
5 billion USD
Et 416,66 USD / tourist
12 mill. tourist
 3. Establishing the selling price of a tourist product

Resolved problem

Establish the selling price of the tour type tourist product, given that:
The length of travel is of 6 nights (7 days), and the charged tariff is of 75 lei/night/tourist;
Meal: 6 days of full board, with a tariff of 45 lei/day/tourist;
Travelled km.: 1100, with a tariff of 0.9 euro/km coach expenses;
1 = 4.5 lei;
Cultural expenses of 50 lei/tourist;
Organizational, special costs:15 lei/tourist;
Agency commission of 10%;
VAT of 19%;
The travel is carried out by a 30 seats coach.

Solution

Direct costs (lei)

Accommodation 6 75 = 450
Meals 6 45 = 270
Transportation 1100 0.9 * 4,5
148,5
30
Cultural expenses 50
Other expenses 15
Total direct costs 933,5
Commission 10% 933,5 = 93,35
VAT 19% 90,05 = 17,74
Total selling price 1044,59
Rounding + 0,41
Selling price of tourist product 1045
The selling price of the tourist product is of 1045 lei.
 6 days tourist tour (5 nights)

Establish the selling price of a tour for one tourist (considering accommodation in double
room) and the extra charge for choosing accommodation in single room, considering the
following information:

- Group of 42 persons + 1 guide + 1 driver;

- Coach expenses 1.2 eur/km, for a route of 1200 km. The agency provides
accommodation (in single room) and meals for the driver, according to the food
services offered for the group; the total amount of parking fees is of 50 eur;
- The guide is provided by the agency from the first to the last day of the tour,
considering a gross salary of 80 eur/day; the agency has to provide single room
accommodation and meal services similar to the ones offered for the group;
- Entrance fees to museums: 36 eur;
- Risk share: 5 eur;
- Travel agencys commission: 10 %.

The services provided for each of the 5 days are as follows:

1. accommodation 60 eur/double, single - 47 eur, dinner 12 eur,
complementary - 1 single room, 2 dinners;
2. accommodation 25 eur/person (accommodation in double room), extra charge for
single room 12 eur, dinner 12 eur,
complementary 1 double room, 2 dinners;
3. accommodation 48 eur/double, extra charge for single room 15 eur, dinner 13 eur,
complementary 2 single rooms;
4. accommodation 44 eur/double room, single room 34 eur, dinner 12 eur,
complementary 1 single room, 1 dinner;
5. accommodation 48 eur/double room, extra charge for single room 15 eur, dinner 14
eur,
complementary 2 single rooms, 2 dinners.

- Breakfast is included in the accommodation rates, as well as VAT and the city tax;
- All prices include VAT according to the law in use.
Cost calculations for each day of the tour (for the TOURIST)
Day Accommodation, Dbl Extra charge for Sgl room Dinner
1 30 17 12
2 25 12 12
3 24 15 13
4 22 12 12
5 24 15 14
TOTAL - euro 125 71 63

Cost calculations for each day of the tour (for the GUIDE)
Day Accommodation, Sgl Dinner TOTAL (euro)
1 0 0
2 0 0
3 0 13
4 0 0
5 0 0
Salary 6 days * 80 euro 480* 493
*Agencys expenses for the guides salary (gross salary+employers contributions) for 6 days;
guides net salary = 274,28 euro for 6 days.

Cost calculations for each day of the tour (for the DRIVER)
TOTAL
Day Accommodation, Sgl Dinner
(euro)
1 47 0
2 25+12 0
3 0 13
4 34 12
5 0 0
118 25 143

Total cost calculation for the entire tour, for one TOURIST
Cost item Per tourist (euro) Observations
1 Accomm. (in Dbl) 125.00 * extra charge for Sgl room = 71
2 Transport:
- coach expenses (1200*1.2)/42 =
- parking fees 34.29
- drivers expenses 50/42 = 1.19
143/42 = 3.4
3 Meals 63.00
4 Guide 493/42 = 11.74
5 Entrance fees to 36.00
museums
Total direct costs 274.62
Risk share 5 eur Aprox. 2% (for unexpected expenses)
TOTAL 279.62
Agencys 27.96
commission 10%
Selling price 307.58
 4. Relative level of salaries expenses within the travel agency

Proposed problem

Calculate the rate of salaries expenses for a travel agency if the agency has
10 wage earners, with a wage of 1500 lei, and the agencys turnover is of
25000 lei.

Total of salaries expenses

The rate of salaries expenses = 100
Turnover

Total of salaries expenses = No. of employees Wage/employee = 1500 * 10 = 15000 LEI

(Wage fund)

15000
The rate of salaries expenses = 100 = 60%
25000

Resolved problem

If for a tour-operator agency the level of salaries expenses increases by 20% and the turnover
increases by 10%, what will be the relative level of salaries expenses for travel agency?

Solution

Level of salaries expenses

Relative level of salaries expenses = 100
Level of turnover

120
Relative level of salaries expenses = 100
110

Relative level of salaries expenses= 109.1%

 5. Labour productivity in a restaurant

Labour productivity is determined using the formula:

receipts volume
WL , where N e - number of employees.
Ne

N op
We define the share of the operative personnel from the total number of employees: ;
Ne
where N op - operative personnel.

Resolved problem

In 2016 the volume of the receipts from the tourism agency Dream Holiday was of 890972
lei. The number of employees was 49 persons, from whom 49 were operative personnel.
Determine the labour productivity for the tourism agency and the share of the operative
personnel from the total number of employees.

Solution

890972 lei
WL = WL 18183 lei/employee
49
Nop 20
100 100 40%
Ne 49
 6. Hubbarts formula for establishing room rates

Hubbarts formula is also known as the bottom-up approach of establishing room rates,
because the first element that we have to decide upon is the net profit which is obtained from
the bottom of the results account. The problem with Hubbarts formula can be solved in 8
steps.
1. A hotel with 130 rooms is expected to cost 15.5 million euro. The initial starting capital is
of 550000 euro, own investment of 3000000 euro, the hotel is also financed from a 30-year
credit of 12000000 euro with an annual interest of 8%. The investor is expecting a turnover
rate of the investment of 25%, the tax on profit is of 16% and the occupancy rate is considered
to be of 80%. Calculate the average room rate using Hubbarts formula.
Other information:
Fixed costs and management taxes:
- tax on buildings 200 000 euro;
- insurances 100 000 euro;
- depreciation 150 000 euro.
Gross exploitation expenses:
- management expenses 200 000 euro;
- general costs 150 000 euro;
- human resources 100 000 euro;
- functionality/maintenance 300 000;
- energy 275 000 euro;
- others 200 000 euro.
Additional expenses:
- restaurant profit 300 000 euro;
- rental, additional services profit 280 000 euro;
- losses telecommunications 125 000 euro.
Direct costs per room: 6 euro.

Step 1:
Calculation of the net profit
Net profit = own investment turnover rate of the investment
Net profit = 3000000 euro 25%
Net profit = 750000 euro

Step 2:
Calculation of the gross profit before taxation
net profit
Gross profit = ; where t = tax on profit
1 t
750000 euro
Gross profit =
1 16%
Gross profit = 892857 euro

Step 3:
Calculation of the fixed costs and the management taxes
Total fixed costs = interest + bank rate + other fixed costs and management taxes
Interest = credit interest rate
Bank rate = credit value/30 years
Other fixed costs and management taxes = tax on buildings + insurance + depreciations

Interest = 12000000 8% = 960000 euro

Bank rate = 12000000/30 = 400000 euro
Fixed costs and management taxes = 200000 euro + 100000 euro + 150000 euro = 450000
euro
Total fixed costs = 960000 + 400000 +450000 = 18100000 euro

Step 4:
Calculation of the exploitation expenses
Exploitation expenses = management expenses + general costs +
+ human resources costs + functionality costs/ maintenance + energy + other exploitation costs
Exploitation expenses = 200000 euro + 150000 euro + 100000 euro +
+ 300000 euro + 275000 euro + 200000 euro = 1225000 euro

Step 5:
Estimating the gross result from the other operational departments of the hotel:
- Profit of other departments with minus
+ Losses from other departments with plus

Restaurant profit 300000 euro

Rental additional services profit 280000 euro
Profit from other departments 580000 euro
Losses of other departments + 125000 euro

Step 6:
Calculation of the income of the rooms department
The income of the rooms department = gross profit + total fixed costs and management taxes + total exploitation
expenses profits of other departments + losses from other departments

The income of the rooms department = 892857 euro + 1810000 euro + 450000 euro +
1225000 euro - 580000 euro + 125000 euro = 3922857 euro

Step 7:
Determining the receipts from the rooms department
Number of rooms occupied in one year = total number of rooms occupancy rate 365 days
Direct expenses of the rooms department = number of rooms occupied in one year direct costs per room
Receipts rooms department = income from rooms department + direct expenses of the rooms department

Number of rooms occupied in one year = 130 80% 365 days = 37.960
Direct expenses of the rooms department = 37960 6 euro/room = 227760 euro
Receipts rooms department = 3922857 euro + 227760 euro
Receipts rooms department = 4150617 euro

Step 8:
Calculating the average room rate
receipts rooms department
Average room rate = 100
number of rooms occupied in one year

4150617 euro
Average room rate = = 109,34 euro 110 euro
37960
 7. Rules for setting the prices for restaurant menus

When setting the prices for the food and the menu, one has to follow a set of coherent and
efficient rules (which are also known under the name principle for everybody). These rules
are:

I) Price dispersion
In a range of products which we share in three equal parts from the point of view of the price,
minimum prices zone, average prices zone, high prices zone, the distribution of the courses in
the average prices zone has to be at least equal with the one from the other two zones. If the
zone is too large, the low prices zone should have more references than the high prices zone.
In the case of luxury restaurants, the high priced products should be more numerous than the
low priced one.

II) Amplitude of the range of products

the highest price from the range
In a given range of products the price amplitude 2.5 3
the lowest price from the range

III) Price quality ratio

average requested price
This relation can be expressed: and has to have values between 0.9
average offered price
and 1. If the value is lower than 0.9, the price range is too high and the restaurant may not
have clients.
sales turnover
- Average requested price =
number of sold portions

sum of thesalesprices
- Average offered price =
number of courses

Problem
Check whether the menu list from an 80-places restaurant respects the principle for
everybody, if the range of products based on beef is as follows:
weight Price Sales S1 S.T.
Beef courses
(g) (lei) (no. of courses) (lei)
1 Potato beef Goulash 350 18 27 486
2 Grilled beef kafta 250 22 43 946
3 Beef Cheesburger 360/150 28 52 1456
4 Viennese Schnitzel 200 29 73 2117
5 Beef Stroganoff 300 32 31 992
6 Hot plate beef 350 32 65 2080
7 Beef Hamburger 350/150 32 81 2592
8 Beef Straccetti 220 36 38 1368
9 Grilled beef tenderloin 200 45 22 990
10 Grilled beef tenderloin with green pepper sauce 200/60 47 15 705
11 Grilled beef tenderloin with gorgonzola sauce 200/80 47 25 1175
Total 368 472 14907
1. Check price dispersion

(Highest price lowest price)/3 = (47-18)/3 = 9,66 the margin for establishing price zones

Low prices zone: lowest price + margin: 18+9.66 = 27.66 => [18-27.66] 2 courses

Medium prices zone: 27.66 + 9.66 = 37.32 => (27,66-37.32] 6 courses

High prices zone: 37.32 + 9.66 = 47 => (37.32 47] 3 courses

6 > 2+3 => price dispersion is correct (the no. of courses in the medium prices zone is higher
than the sum of the number of courses in the low and high prices zone)

2. Check the amplitude of the range of products = highest price/lowest price = 47/18 = 2,61
The amplitude of the range of products is correct.

3. Check quality-price ratio

- determine sales turnover = 14907 lei

14907
Average requested price = 472 = 31.58 lei

- determine the sum of selling prices = 368 lei

368
Average offered price = = 33.45 lei
11

Quality-price ratio = average requested price / average offered price = 31.58 / 33.45 = 0.94

The quality-price ratio is correct.

The principle for everybody is respected in this restaurant.

 8. Air transport fares

Determine the lowest fare for a round-trip flight ticket from Bucharest to Rome, from May
25th -29th 2017, considering the following information, as well as the specific requests of
clients:
(lei)
Company Wizz Air (1) Wizz Air (2) Ryan Air BlueAir
Flight ticket 248 530 315 480
Small checked-in
baggage/segment 122 Included 72 NA
Large check-in baggage
/segment 169 45 99 81
Small cabin bag/segment Included Included Included Included
Large cabin bag/segment 47 Included 23 NA
Assigned seat fee/segment 26 Included 27 0
Administration fee 10 10 0
Meal included No No No No
Airport check-in/segment 47 47 101 0
Online Check-in Free Free Free Free
Byclycle/segment 135 135 270 113

a. the client requests large checked-in baggage and assigned, window-seat view in the front of
the airplane (online check-in);
b. the client does not request baggage, but wants an aisle seat (online ckeck-in).

Solution:
a. the client requests large checked-in baggage and assigned, window-seat view in the front of
the airplane (online check-in);
Company Wizz Air (1) Wizz Air (2) Ryan Air BlueAir
Flight ticket 248 530 315 480
Large check-in baggage
/segment 169*2=338 45*2=90 99*2=198 81*2=162
Assigned seat fee/segment 26*2=52 Inclus 27*2=54 0
Administration fee 10 10 0
Meal included Nu Nu Nu Nu
Online ckeck-in Gratuit Gratuit Gratuit Gratuit
TOTAL 648 630 567 642

b. the client does not request baggage, but wants an aisle seat (online ckeck-in).
Company Wizz Air (1) Wizz Air (2) Ryan Air BlueAir
Flight ticket 248 530 315 480
Assigned seat fee/segment 26*2=52 Inclus 27*2=54 0
Administration fee 10 10 0
Meal included Nu Nu Nu Nu
Online ckeck-in Gratuit Gratuit Gratuit Gratuit
TOTAL 300 540 369 480
 9. The breakeven point of an entertainment company

The break-even point (BEP) is the point at which cost or expenses and revenues are equal:
there is no net loss or gain, and one has broken even. A profit or a loss has not been made,
although opportunity costs have been paid, and capital has received the risk-adjusted,
expected return.

Resolved problem

An auditorium has 500 seats, fixed costs amounting to 5000 lei, average variable costs of 5
lei/seat and sells the ticket for the show by 20 lei. Calculate how many tickets for the show
must be sold in order to reach the breakeven point and what must be the level of occupation of
the auditorium in order to attain the breakeven point.

Solution
CT = total costs
CF = fixed costs
CV = variable costs
T = turnover
CF + CV = T
CF + q CVm = q p, where:
q = no. of tickets sold to reach the breakeven point
CVm = average variable cost
p = the price of the ticket for the show

5000 lei + q 5 lei = q 20 lei

5000
q=
20 5
q = 333,333 (no. of tickets which must be sold to reach the breakeven point).
333,33
Lo = 100 = 66.6%,
500
where Lo is the level of occupation of the auditorium.
In this case, the breakeven point is achieved.

10.The contract guarantee under a contract between a travel agency and a hotel

What is the amount of the contract guarantee that a travel agency has to pay for bulk booking
hotel rooms, considering that the reservation is made for a group of 50 tourists, for a 10 day-
stay (9 nights), at a rate of 60/one place, given that the hotelier imposes a minimum
guarantee coefficient of 80%?

Contract guarantee = Nr. of places * Rate/place * Nr. of nights * Minimum guarantee

coefficient = 50 * 60 * 9 * 0.8 = 21600

This means that no matter how many places the travel agency will manage to sell for this
specific program, it is mandatory to pay the above mentioned above for the hotel.