In a bid to steer the company forward, Dhruv Shringi, the Whole Time Director and CEO of Indian online travel firm Yatra, announced that the business intends to build upon its corporate travel operations. Rather than targeting the less profitable consumer market that is influenced by competitive pricing, Yatra plans to prioritize its higher-value corporate clientele who offer reliable, repeat business. During the quarter that concluded on June 30, Yatra observed a significant increase in the portion of gross bookings coming through its B2B division. Shringi remarked that about 67% of gross bookings are generated through B2B and projected that this share could edge towards 70% by the end of the fiscal year.
As part of its strategy, Yatra wants to establish its platform as an integral component of corporate clients’ everyday operations. This approach builds ‘switching costs’ – any added exertion required for a client to switch platforms once integrations have been completed. Shringi highlighted that a majority of Yatra’s rivals are still facilitating companies using traditional offline methods. Yatra’s competitive edge lies in its deeper technological integration with clients and greater online market penetration.
Yatra maintains the belief that its superior tech integration and digitization give it the upper hand over competitors still servicing their customers via offline methods with only a basic level of integration. Shringi noted the widespread movement towards digital adoption across the industry presents a golden opportunity for Yatra to substantially expand its market share in the corporate travel segment.
In further commitment to its expansion strategy, Yatra announced that it had purchased Globe All India Services (Globe Travels), a provider of corporate travel services, for INR 1.28 billion ($15.25 million) in cash last fiscal. The core of Yatra’s growth plan revolves around maintaining long-term relationships with its corporate clientele. Shringi referred to the longevity of their major clients as testament to Yatra’s enduring relevancy. He shared that, ‘Out of our top 100 clients, 73 have been partnering with us for more than five years.’
Yatra believes these longstanding relationships provide a steady stream of revenue and create operating leverage once the technical aspects have been integrated. Contrary to the conventional approach of luring consumers with discounts and focused marketing, Yatra has adopted a unique strategy. Shringi said, ‘Our annual retention rate for corporate travel is exceeding 97%; this is primarily driving high operating leverage in the business.’
Shringi identified two key factors contributing to Yatra’s improved margin performance. The first change was towards reducing direct discounts offered to customers. Instead of slashing prices drastically, Yatra relied more on offers served through their banking and marketing partners. This allowed for a significant reduction in Yatra’s customer acquisition costs.
The second factor attributed to margin improvement is the shift in business focus toward higher-margin offerings, such as corporate airfare, hotel bookings, and packaged trips. Shringi highlighted this saying, ‘Relative to the net margin of about 3% to 4% from air travel, hotels, and packages have closer to about an 11% net margin. Consequently, our mix of hotels and packages, year over year, has increased from about 15% to about 20% of gross bookings.’
These operational changes have appeared to positively impact Yatra’s net margin and revenue-after-cost metrics, which have overtaken the growth in overall gross bookings. Despite inconsistencies in the economic recovery, Yatra managed to report a year-over-year growth of about 9% in gross bookings for the quarter. This contrasts to preceding periods of overall volume decline.
Examining the disaggregated data, a modest improvement was noted in air ticketing while hotel bookings and packaged travel options experienced faster growth rates. As a part of their immediate growth strategy, Yatra intends to leverage cross-selling hotel services to corporate customers. A number of recent wins with corporate clients were led by hotel bookings, which then expanded to incorporate broader travel services.
Currently, hotel and package deals represent the products with the highest margin and are the easiest to cross-sell for Yatra. To illustrate, several recent large corporate contracts were initiated through hotel bookings, which in return provided access to more comprehensive travel services, thus expanding the scope of the client relationship.
Touching on the key numbers for the quarter, Yatra’s operational revenue soared by 108% year-on-year, hitting the INR 2.1 billion ($24 million) mark in Q1. The company’s Adjusted EBITDA also experienced significant growth, surging by 138% from the corresponding period in the previous year, totalling INR 249 million ($2.8 million).
During the same period, Yatra also reported a staggering 296% surge in net profit compared to the same quarter in the preceding year. This impressive uptick resulted in a net profit of INR 160 million ($1.8 million).
Reflecting the company’s robust growth, Yatra continued to attract corporate clientele, adding 34 new corporate accounts in the quarter. These new additions have the potential to contribute approximately INR 2 billion ($23 million) to the company’s annual billings.
The post Yatra CEO Announces Reinforcement of Corporate Travel Operations appeared first on Real News Now.
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