Industry Focus: Finance Automation in the Hospitality Industry

Financial management is the backbone that supports the operations and decisions made in the hospitality industry. Businesses like hotels, restaurants, resorts and travel agencies need to ensure their operations are profitable and sustainable. In this blog, we discuss finance automation in the hospitality industry and how it drives success in this ever-evolving economy.

What Are the Different Sectors in the Hospitality Industry and How Is Financial Management Significant for Them?

The hospitality industry consists of sectors that house, feed, entertain and transport customers. While each sector has its unique traits, they often work together. Below are the different sectors and how financial management plays a significant role in each.

1. Lodging

The lodging sector refers to businesses that provide housing or accommodation to guests. The most common types of lodging businesses include:

• • • • Hotels — Hotels usually house guests on vacation or business travel. They often offer amenities such as gyms and pools.
      • Bed and breakfasts — These are smaller establishments that offer lodging at night and serve breakfast in the morning.
      • Vacation rentals — Vacation rentals are usually privately owned and listed on websites such as Airbnb.

Finance managers of the lodging sector must have a thorough understanding of its financial aspects. They must have practical financial controls so they have a good view of their cash flow, liabilities and profitability. For example, revenue management is essential to optimise room rates and maximise occupancy.

Managing finances in this sector allows managers to maintain financial records and monitor the business’s performance. For example, hotel finance management involves managing financial transactions to ensure that the hotel complies with tax regulations. Hotel finance management also helps managers identify trends, patterns and opportunities that can improve hotel operations.

2. Food and Beverage

The food and beverage sector involves everything from food preparation, transportation and serving. The most common types of food and beverage businesses include restaurants, cafes, cafeterias and pubs.

Not only should managers understand the science of food but also the financial aspects that drive profitability. For example, knowing how to manage a restaurant’s finances involves being on top of the cost of ingredients. Their prices fluctuate due to various factors such as supply and demand. Finance management in the food and beverage sector is essential to understand and anticipate these changes so managers can mitigate financial risks.

3. Meetings and Events

This sector can consist of social, sporting or business events—whether it’s a wedding or a large conference.

Two of the roles that financial management plays in this sector are initial budgeting and expense tracking. The finances must stay within the event budget so managers can also identify the changes they need to make.

4. Recreation

Businesses in the recreation sector provide entertainment and experience to their customers. Examples include amusement parks, museums and theatres. In this sector, businesses commonly rely on concession sales, food and beverage sales and admission tickets to gain revenue.

Just like in any sector, the recreation sector goes through challenges such as fluctuating numbers and unpaid fees. Financial management ensures proper tracking of fees, effective resource allocation and optimised pricing strategies.

5. Travel and Tourism

The travel and tourism sector helps guests in visiting destinations outside of their daily environments. This sector crosses over with other sectors because as guests plan their trips, they also plan their accommodations and recreational activities. Travel and tourism agencies help in choosing a hotel, identifying attractions and booking transportation, to name a few.

Finance management helps keep detailed records and monitor cash flow. A travel agency must keep records of their customers and vendors to ensure accurate financial statements. For instance, a customer may ask how much they owe on their upcoming trip. Your agency must be able to easily pull up their balance.

What Is the Importance of Financial Management in the Hospitality Industry?

1. Effective regular reviews

Your finance strategy must include reviewing your accounts from time to time so you get an accurate view of the business’s financial health. Doing so can help you develop strategies for cost control.

Financial reviews include tracking your expenses and revenue. Be sure to compare actual expenses against your budget and identify areas of inconsistencies.

2. Financial forecasts

Financial forecasts in the hospitality industry can give insights into your business’s cash flow, expenses and revenue. With the right financial forecasts, you can make financial reports that allow managers and decision-makers to see an overview of each operational area of the business. 

3. Planning

The hospitality industry is one of the most susceptible to changes caused by demand patterns and macroeconomic trends. One clear example is the COVID-19 pandemic. According to a report by the United Workers Union, the hospitality industry “has been the worst hit industry during the pandemic, with around 1 in 3 paid jobs lost by mid-March and total wages cut by a massive 30%.” This is why any hospitality business must have the proper planning to evaluate investment opportunities for the business. 

The Best Way to Handle Finances Is Through Finance Software for the Hospitality Industry

Finance software solutions integrate with other systems in the hospitality industry, such as point-of-sale (POS) systems and revenue management systems. This integration allows for easier and seamless data exchange, giving management an easier time to handle finances and understand the business's financial performance.

Fuzzy Events, an events company responsible for some of Australia’s top events, was able to save time and costs when they used our finance software that resolved issues coming from paper-heavy processes and manual data entry. “Prior to expensemanager (now ProSpend), our team were spending hours per week manually processing invoices and typing in data. We found ourselves shuffling through paper and running out of storage space,” says Daniel Lyons, finance manager at Fuzzy Events. As they integrated ProSpend with MYOB Advanced, the company was able to completely streamline their spend management.

ProSpend virtual cards also helped Fuzzy Events by eliminating the need for the company to work with banks to get cards. Daniel shares that they were “able to closely control how much and where each card can transact with multiple limits offered by ProSpend and can also closely monitor transactions in real time.”

“We cannot recommend ProSpend enough for those looking to automate their Spend Management. ProSpend is must-have software for Finance Teams,” says Daniel.