What Is Treasury Management in Hospitality?

Treasury management is what keeps hotel businesses financially stable and prepared throughout the year, and it is more than just bookkeeping. It involves the management of the cash coming in/ going out and financial practices that best ensure you have enough cash to cover both.

Think of it as your financial muscle, ensuring your boutique hotel, busy restaurant, or full-service resort is in a cash-positive position to:

– Ready to pay your team

– Cover all vendor-related expenses as well as costs during off-peak periods

– Build the needed resources for growth

Treasury management is not only a back-office process but also requires the involvement of the front-office functions, allowing hospitality businesses to operate, plan, and be financially buoyant in this dynamic industry.

Technology is changing the way treasury management works. Treasury Management Systems (TMS) automate crucial core treasury functions—automate cash positioning, payment processing, bank reconciliation, and financial reporting.

TMS enables hotel businesses to meet changing demands and keep seasonal impacts at bay, thus achieving:

– Proactive planning for seasonal changes

– Enhanced ability to manage operational costs during off-peak periods

– Improved liquidity during off-peak seasons

– Optimised resource allocation

– Reduced risk of overstocking or understocking

– Minimised the impact of financial market volatility

– Ensured compliance with financial regulations

Additionally, built-in dashboards in a TMS allow not just treasurers but also operators, finance teams, and executive teams relevant information while ensuring everyone is on the same page and capable of making faster, smarter decisions.

This reduces human error, freeing teams up to concentrate on the strategic aspects of their roles.

Core features of a treasury management solution

Let’s break down the core functions that make treasury management a must-have in the hospitality world.

1. Cash flow forecasting: Reading the road ahead

Cash efficiency is the oxygen to life. Effective cash flow management allows businesses to see where the money is coming from, where the money is going, and when the business will need that money the most.

The process tracks and analyses all revenue sources, from room bookings to F&B sales, events, payroll, supplies, maintenance, marketing, etc. Understanding these patterns helps:

– Forecast future cash availability and needs at different points in time

– Identify areas for potential cost optimisation

– Ensure sufficient funds are allocated to the right functions

Using gut feelings and experiences to calculate and predict seasonal dips, though good, effective forecasting still requires real-time insights to truly enable hoteliers to proactively plan ahead, avoid potential cash shortages, and thus, make informed, impactful decisions.

2. Working capital management: Balancing operational cash flow

Working capital is the liquid assets (cash and near-cash) available to conduct business on a day-to-day basis and cover its short-term debts. Effectively managing working capital requires balancing the business’ obligations and what is owed to the business to avoid a liquidity crisis.

This involves strategically negotiating favourable payment terms with suppliers, optimising payment and debt schedules, and avoiding unnecessary or premature payments. For hotel businesses, this means having clear billing processes, diligently following up on outstanding invoices, developing detailed incentive policies while maintaining good terms with all suppliers and vendors.

Treasury management can help hotel businesses strategically manage cash and liquid assets by improving payment terms, managing receivables, and optimising reserves during low seasons. Treasury management determines the optimal level of reserves based on the hotel’s specific risk profile and anticipates cash flow volatility.

For instance, in the case of a small resort, the resort might:

– Negotiate early deposit payments from group bookings (to gain access to funds to cover immediate operating expenses or invest in necessary preparations).

– Manage to stretch its arrangements with suppliers (i.e., negotiating longer payment terms with suppliers to hold onto cash for a longer period).

This combination means that the resort has cash flowing through its business operations. Even when revenue from individual bookings declines, the cash generated from group booking deposits and the extended payment terms help the resort maintain sufficient liquidity to cover its ongoing obligations (e.g., payroll and essential expenses), preventing a cash crunch during the downturn.

3. Risk management: Protecting against the unexpected

From fluctuating exchange rates to economic shocks or even weather-related closures, risk is part of the hospitality game. Treasury management equips hotel businesses with tools to reduce that uncertainty by identifying, measuring, and mitigating financial risks that could negatively impact a business’s financial health and operational stability.

This could mean:

– Setting aside contingency reserves to buffer in case of emergencies, thus enhancing the hotel’s ability to weather any storms.

– Using financial hedging to stabilise currency exposure and lock in exchange rates for future transactions to protect profit margins from eroding, making budgeting and forecasting more reliable.

– Or securing credit lines for backup liquidity, creating a safety net in case of temporary cash shortage.

4. Financial planning: Thinking long-term, not just day-to-day

Treasury management is not merely surviving – it is about developing strategies to empower leaders to create a financial map for future growth.

This means strategically timing when to invest in new amenities, how to pay for employees, renovations, IT upgrades, or when to open new locations. For example, a boutique hotel uses the surplus of winter high occupancy to invest in a rooftop bar in the spring. By forecasting the cash availability and timing investments, they avoid using emergency funds and create a new revenue stream just in time for summer.

Treasury management removes the guesswork from the equation and utilises past data to project future cash inflows, outflows, and return on investment to help hospitality businesses stay financially confident, regardless of the seasons. It is not just about managing money; it is about keeping the momentum.

Final words

Seasonality is an inescapable reality for every hospitality business, but the financial consequences can be managed.

As the industry continues to experience elevated volatility and unpredictability, treasury management is no longer a support function but a competitive advantage that hoteliers can leverage. Simply put, investing in data-informed and flexible treasury strategies today establishes the foundation for exceptional performance and sustainable growth in the next seasons.