Dhruv Shringi, Chief Executive Officer (CEO) of Indian online travel business, Yatra, has outlined the company’s intention to expand its corporate travel division further. The strategy will involve prioritizing high-value, regular corporate clientele as opposed to customers acquired through cost-driven leisure outings. Shringi underscored this during the disclosure of the company’s quarterly report which ended June 30, showing a significant percentage of gross bookings originating from their Business to Business (B2B) operation.
For that specific quarter, Yatra’s B2B service accounted for approximately 67% of the entire gross bookings. Shringi expects to see an upward trend and anticipated that by the end of the current fiscal year, the level could be close to 70%. The aim of the company is to make its platform a regular part of corporate customer activities which, according to Shringi, creates ‘switching costs’ or the additional effort and resources a company has to expend to switch platforms once fully integrated.
He pointed out that a large number of their rivals are still utilizing traditional methods to offer their services to companies. Yatra, on the other hand emphasizes a technologically integrated service approach, having stronger online presence and connectivity with their customers. The company suggests that this approach will provide them an advantage as businesses continue to digitize their travel arrangements.
According to Shringi, despite most of their competitors continue to serve customers in the traditional way with minimal integration, this creates a golden opportunity for Yatra to capitalize on the ongoing trend of increased digital adoption in the entire sector. Yatra believes its strong technological interconnections with customers serves as a significant selling proposition. The company’s competitive edge amplified when it acquired Globe Travels (officially known as Globe All India Services) last year, a service provider known for corporate travel, at a deal around INR 1.28 billion (equivalent to $15.25 million).
Long-term corporate clients form the cornerstone of Yatra’s strategic planning. The company views the longevity of the big clients’ tenure as a testament to its appeal or ‘stickiness’. As per Shringi, ‘In our top 100 clients, we have had 73 of them engaged with our services for over five years.’ The company interprets these long-standing relationships as sources of predictable revenue stream and operational leverage after successful technical integrations.
Unlike other online travel platforms that focus on consumer acquisition through rebates and publicity, Yatra has chosen a different path. Shringi claimed, ‘Our yearly retention rate for corporate travel services is above 97%, which is what gives us such high operational leverage.’
He further provided insights into two main factors that contributed to improving the company’s margin. Firstly, Yatra adopted a strategy of minimizing direct discounts to customers. Instead of steep price reduction, they leveraged offers through banking partners and marketing collaborators, thus greatly reducing Yatra’s customer acquisition expenditure.
Secondly, the company’s attention shifted to higher-margin commodities like corporate airfares, hotel packages. Shringi explained that ‘Hotels and packages hold net margins around 11% as opposed to a marginal 3%-4% for air. The ratio of hotels and packages in our gross bookings has escalated from roughly 15% to about 20%’. Such strategic shifts bolstered the company’s net margin and boosted revenue after cost implementations, exceeding the growth in gross bookings.
During this quarter, Yatra reported an annual increase in gross bookings of around 9%, which led to a rebound after previous declines in aggregate volume. However, the recovery pattern varied with modest augmentation in air ticketing, while the growth rate for hotels and packages were notably faster. To stimulate immediate growth, Yatra is keen on cross-selling hotel services to their corporate clients.
Several of the company’s recent corporate victories were ‘hotel-led’. It means new clients initially engaged with Yatra for hotel accommodations, which subsequently created opportunities for broadening the range of services offered. In the present scenario, it seems hotels and packages are the higher-margin products and are more effective in cross-selling.
The fiscal performance of Yatra in the first quarter was solid. The company realised a growth of 108% year-on-year in terms of operational revenue, amounting to INR 2.1 billion (approximately $24 million). The adjusted EBITDA reflected a robust surge of 138% year on year, reaching INR 249 million (close to $2.8 million).
Interestingly, Yatra’s net profits for the same period soared by 296% resulting in INR 160 million (or $1.8 million) compared to the previous year. As part of its growth strategy, the company added 34 new corporate accounts to its customer roster during this quarter. These new accounts are projected to potentially contribute INR 2 billion (around $23 million) to the yearly billing.
While the travel industry overall is shifting towards digital solutions, Yatra remains focused on its B2B model, specifically targeting corporate businesses with their integrated and online-focused approach. By leaning on ‘switching costs’ and leveraging their more digitally advanced platform, Yatra believes it is uniquely positioned to capitalize on this shift towards online and integrated travel solutions.
Even amidst the trend of heavier discounts and aggressive marketing seen in other online travel platforms, Yatra plans to prioritize its long-term corporate customers, cross-selling more profitable products like hotel packages. Given its successful trajectory so far, it will be fascinating to see if the company can maintain its momentum and achieve the ambitious growth outlined in their latest strategy.
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