Hotels in arid coastal areas use mainly desalinated water (using reverse osmosis) for their domestic water supply, and treated wastewater for irrigating green areas. Private water companies supply these hotels with their potable and non-potable water needs. There is normally a contractual agreement stating a minimum amount of water that has to be supplied by the water company and that the hotel management has to pay for regardless of its actual consumption (“contracted-for water supply”). Hotels have to carefully analyse their water requirements in order to determine which percentage of the hotel's peak water demand should be used in the contract in order to reduce water costs and avoid the risk of water shortage. This paper describes a model to optimise the contracted-for irrigation water supply with the objective function to minimise total water cost to hotels. It analyses what the contracted-for irrigation water supply of a given hotel should be, based on the size of the green irrigated area on one hand and the unit prices of the different types of water on the other hand. An example from an arid coastal tourism-dominated city is presented: Sharm El Sheikh (Sharm), Egypt. This paper presents costs of wastewater treatment using waste stabilisation ponds, which is the prevailing treatment mechanism in the case study area for centralised plants, as well as aerobic/anaerobic treatment used for decentralised wastewater treatment plants in the case study area. There is only one centralised wastewater treatment plant available in the city exerting monopoly and selling treated wastewater to hotels at a much higher price than the actual cost that a hotel would bear if it treated its own wastewater. Contracting for full peak irrigation demand is the highest total cost option. Contracting for a portion of the peak irrigation demand and complementing the rest from desalination water is a cheaper option. A better option still is to complement the excess irrigation demand from the company that treats and sells wastewater, if available or from another wastewater treatment company at a higher cost (but at a cost cheaper than that of desalination water) mainly due to the high demand season and the additional cost of trucking. In some cases, however, like in Sharm, the amount of treated wastewater is limited and variable during the year and some hotels have no choice but to partially use desalination water for irrigation. A conscious strategy for water management should rely solely on treated wastewater on-site. This can be achieved by: increasing the efficiency of the irrigation system, reducing the area of high-water consuming plantation (e.g. turf grass) and/or shifting to drought resistant plants including less water-consuming or salt tolerant turf grass.