Liquidity Management Heads off the Beaten Path

Congratulations to Holiday Inn Club Vacations for winning the 2021 Silver Alexander Hamilton Award in Liquidity Management!

The management team at Holiday Inn Club Vacations prioritizes liquidity. The company currently owns 28 resorts across North America and is continuously adding more properties, as well as renovating those already in the portfolio.

“We’re a very acquisitive company,” explains Sasha De Gracia, director of finance–treasury services for Holiday Inn Club Vacations. “Within the past couple of years, we’ve added the Tahoe Ridge Resort overlooking Lake Tahoe, the David Walley’s Resort in the foothills of the Sierra Nevada mountains, and a New Orleans Resort located just a block from the French Quarter. Our strategy is to create memorable vacations for our owners by continuing to add resorts in the places where they want to vacation.”

Because acquisitions are always top of mind, liquidity is as well. Unfortunately, a few years ago, cash management and cash positioning were significant challenges for the company’s six-member treasury team.

“Cash positioning would take two different team members more than two hours each, every day,” De Gracia says. “We work with a lot of different banking partners, leveraging them in different ways for different services and different accounts. The cash managers would download cash balances and other data, consolidate it, and load it into an Excel spreadsheet. Then they would generate a report from Excel that they would send out to everyone who needed liquidity information, myself included.”

Forecasting was similarly manual. “A lot of the forecasting took place in Excel,” De Gracia says. “A treasury team member would look at the different lines of business to determine what historicals were telling us. The FP&A [financial planning and analysis] group had their own forward-looking model, and we would pull both of those into Excel and create a cash flow forecast.”

Holiday Inn Club Vacations decided to implement a treasury management system from TreasuryXpress to automate many of the tedious and routine liquidity management tasks. The company established data feeds from its banks so that balances and transactions flow automatically into the treasury solution. “We integrated the BAI—the bank balances and transactions—for all our banking partners into the TreasuryXpress system,” De Gracia says. “Anyone with appropriate permissions can go into the system and see a consolidated cash positioning snapshot that is always up to date.”

This approach “completely eliminated that two-ish hour, per person, process,” she adds. “Now one person spends maybe 15 minutes a day on this.” In addition, the automation makes treasury staff more interested in exploring the data coming out of the system. “It’s human nature that if you spend two and a half hours putting a report together, you might not want to spend another two hours delving into it for variances and measures. This transition motivates our team to not just put the report together, but to really look at what it’s saying and what we need to be concerned about.”

Holiday Inn Club Vacations is leveraging the treasury system’s forecasting capabilities, as well. “We created budget codes that describe different types of payments and revenues,” De Gracia explains. “The system places inflows and outflows into those buckets, leaving the ones it doesn’t recognize labeled ‘pending.’ Users can go in and assign budget codes to those transactions. Then there is an AI [artificial intelligence] component of the treasury system that predicts future cash flows for each bucket based on historical trends.”

Staff can manually tweak the TreasuryXpress forecasts when needed. “If, for example, we know that a big expenditure is coming up that is out of the ordinary, we can go in and manually adjust the forecast to reflect that,” she says.

One challenge that arose in implementing the system was that the company’s line-of-credit balance didn’t pull in automatically. “We have a credit revolver tied to one of our operating accounts,” De Gracia says. “If the account balance gets below a certain threshold, then the account automatically borrows from the revolver to bring its balance to the specified level. The amounts ebb and flow on a daily basis, and BAI files from the bank don’t include the line of credit because it’s not technically an account. We had the option of digging into the transactions flowing to and from the operating account to come up with a balance for the line of credit, but to confirm that balance, someone would have to email the bank and wait for a reply. We wanted that balance to pull in automatically along with the others.”

Holiday Inn Club Vacations worked with TreasuryXpress to develop a custom solution to this problem: They created a dummy account within the treasury system that holds the credit revolver balance. “The system takes a snapshot to show where the balance is and then provides that along with all the rest of our accounts,” De Gracia says.

The company is also using its treasury system to support bank account management. “Like most large companies, we have a lot of accounts,” De Gracia says. “With all the different lines of business and activity we have flowing through them, it’s very helpful to have a central data repository for bank account recordkeeping. We use the treasury management system to store documentation, including names of the legal signers and the COBO [certification of beneficial owners] forms.”

Holiday Inn Club Vacations and TreasuryXpress collaborated to innovate on this front as well. The issue, says De Gracia, was that credit card companies require an independent merchant ID for each outlet that accepts card payments in every resort location. So, for example, each front desk, restaurant, bar, and spa on the resort’s premises will require its own merchant ID. In the past, the company used spreadsheets and a paper trail to track the merchant IDs and to associate them with specific bank accounts. “If we closed an outlet, then we would have to manually uncover exactly which accounts the merchant ID needed to be disabled from,” De Gracia says. “This could become very time-consuming.”

The solution is a custom-built module within the treasury management system that stores all the company’s merchant IDs and tags them to specific accounts. “So now, if we need to disable an outlet, we know exactly which accounts that change affects,” De Gracia says. “This greatly improves our visibility and helps us disconnect merchant IDs a lot more quickly.” It also saves money, she points out: “There is no chance of lag, where we might continue paying fees because treasury doesn’t realize the merchant ID should be disconnected until the accounting cycle close, when we notice the merchant hasn’t had any activity for some period of time.”

De Gracia says one lesson learned from this project is to not simply accept at face value the technologies that vendors and banks are currently offering. “Push your partners to create data connections and build the functionality you need,” she says. “Even if you need a capability that isn’t commercially available right now, there’s always a viable workaround that can be created. The end result might not be perfect, but it’s always possible to improve the process.”

She adds: “I would also advise treasury professionals undertaking a project like this to not assume everyone understands the implications of what they’re doing. Sometimes you need to explain to your stakeholders what you’re trying to implement and clarify what it means and how it’s going to drive change for the company.”

See also:

Recommended Stories