India’s virtual travel firm, Yatra, is set to expand its operations in the corporate travel sector. Dhruv Shringi, the CEO and Whole Time Director, stated that Yatra’s future strategy would be centered around retaining and fostering high-value, repeat corporate clientele, as opposed to catering to the cost-sensitive leisure traveller market.
In the last quarter that concluded on June 30, Yatra saw an impressive surge in gross bookings from its B2B sector. The online travel agency reported that nearly 67% of total bookings were generated from this segment. Shringi anticipates the B2B share stepping up to an estimated 70% by the culmination of this fiscal year.
In a strategic move to build loyalty and retain corporate customers, Yatra intends to make its platform a common fixture in their daily routines. Once companies incorporate Yatra’s system within their operations, Shringi opines that the ‘switching costs’, i.e., additional effort to shift to another provider, would discourage clients from defecting.
The CEO indicated that Yatra’s edge over competitors stems from its advanced technical integration with customers and greater online market penetration. Contrasting this, he added that a majority of competitors continue to serve corporate customers through offline channels and lack substantial operational integration.
Yatra’s competitive advantage, they believe, is enhanced as businesses begin digitizing travel procedures. Shringi stated, ‘The present moment presents a golden opportunity for Yatra, given the exponential growth in digital adoption within the industry and the fact that many competitors are yet to transition from offline servicing and embrace integration.’
In the previous year, Yatra widened its corporate travel footprint by acquiring Globe All India Services (Globe Travels), a business travel services provider, for INR 1.28 billion ($15.25 million) outright in cash.
The crux of Yatra’s customer acquisition and retention strategy relies heavily on long-standing corporate alliances. Shringi cites the length of client relationships, especially among the larger accounts, as a demonstrative measure of the business’s robustness. He said, ‘Of our significant 100 customers, 73 have maintained a business relationship with us which extends beyond five years.’
These reliable client associations provide the company with a stable revenue flow and contribute to operational leverage once technical integrations are setup. The company changed its strategic approach by shifting focus from driving consumer traffic through discounts and marketing campaigns to maintaining high corporate retention rates.
Shringi discussed the high annual corporate retention rate of over 97%, attributing it as a key reason for Yatra’s solid operational leverage. Furthermore, he flagged two primary factors that led to an improvement in profit margins for the online travel company.
A prominent factor is the company’s shift from directly offering heavy discounts to clients. Rather, Yatra is leveraging offers delivered through bank transactions and marketing partnerships. This new strategy has effectively reduced the cost of client acquisition for Yatra which has strengthened its bottom line.
The second factor leading to a surge in profits includes a change in the blend of services, leaning towards higher-margin offerings such as corporate airfares, hotels, and travel packages. ‘Net margins for hotels and travel packages approximately touch 11%, which is significantly higher than the 3%-4% net margin that airfare offers,’ said Shringi.
‘The combination of hotel and package services has augmented from roughly 15% to 20% of gross bookings over the past year,’ Shringi further added. These strategic alterations have ultimately led to a boost in the company’s net margin and revenue-after-cost metrics, propelling it past the unrefined growth in gross bookings.
During the recent quarter, Yatra noticed a 9% annual increase in gross bookings, marking a reversal from previous volume decreases. This recovery, however, has not been consistent across all areas: air ticketing saw moderate improvement, while growth in hotel bookings and packages was stronger.
Cross-selling hotel services to its corporate customers has been identified by the company as an immediate lever for growth. Shringi highlighted the phenomenon of new corporate clientele often being ‘hotel-led’, that is, their initial engagement with Yatra is often through booking hotels which later leads to an exploration of a broader range of travel services.
Currently, hotels and travel package services are high-margin products that Yatra finds easier to cross-sell to its clients. Considering more detailed financials for the quarter: revenue from operations surged 108% YoY to stand at INR 2.1 billion ($24 million). Similarly, adjusted EBITDA experienced a 138% YoY growth, hitting INR 249 million ($2.8 million).
Net profit for the quarter boomed with a 296% increase YoY to reach INR 160 million ($1.8 million). The company managed to continue expanding its corporate client base during the quarter by securing 34 new corporate accounts, offering a potential future annual billing of INR 2 billion ($23 million).
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