Focusing on the expansion of its corporate travel portfolio, Yatra, an Indian web-based travel company, is looking to build repeat relationships with higher-value corporate clients. In a clear diversion from the typical price-focused approach to leisure business, this strategy underscores Yatra’s commitment to corporate customers. Whole Time Director and CEO, Dhruv Shringi, highlights that the company’s efforts are trained on capturing a greater market share from its B2B business.
An assessment of its financial performance for the quarter ending June 30, reveals a promising trend – a marked rise in gross bookings from the corporation’s B2B section. According to Shringi, approximately 67% of total gross bookings were logged from B2B offerings, a figure he projects will climb closer to 70% by the end of the fiscal year. This corporate-oriented strategy is an integral component of Yatra’s business model, seeking to become an inseparable part of its corporate clients’ business routines.
Yatra is aggressively focusing its resources to facilitate integration with its corporate clients, creating what Shringi refers to as ‘switching costs.’ These costs represent the considerable effort and resources that would have to be expended by a corporate client if they decided to migrate to a different platform. Shringi emphasized that this particular strategy gives Yatra an edge over its competitors, many of whom still operate predominantly offline and have yet to make substantial inroads in the digital realm.
Yatra boasts a comprehensive technical integration platform with a robust online presence. Its unique digital-first approach, the company asserts, offers them the advantage they need to establish a strong foothold in the corporate travel sector, particularly at a time when more companies are embracing digital travel arrangements. The fact that many of their competitors are still operating offline, offering minimal integration, presents a significant window of opportunity for Yatra to seize a larger share of the digitizing market.
Shringi explains this golden opportunity for Yatra, stating that the wave of digital adoption sweeping across the industry has opened up an untapped space for the online travel company to penetrate. Enhancing their pursuit of an advanced corporate travel portfolio, Yatra disclosed its acquisition of Globe All India Services (Globe Travels), a corporate travel services provider, last year. The cash transaction was valued at INR 1.28 billion ($15.25 million).
In Yatra’s engagement with the corporate travel sector, longstanding clients form the mainstay of their strategy. Shringi uses evidence of prolonged relationships with key clients as a testament to the company’s standing in the market. Specifically, he points out that out of its top 100 customers, 73 have maintained a business relationship with Yatra for a period exceeding five years.
Yatra believes that these enduring relationships, once extended with technical integrations, yield stable revenue streams and generate operating leverage. However, the company has decided to step away from the customary strategy of enticing consumers with deep discounts. Instead, Yatra has placed its trust in the loyalty of its corporate clients, a move that is underlined by a remarkable annual retention rate of above 97% for corporate travel.
Shringi elucidated on how this impressive retention rate underpins Yatra’s strong operational leverage in the industry. Additionally, he identified two core drivers for boosting the company’s margins. Firstly, direct discounting to customers was significantly curtailed, thereby reducing the cost of client acquisition. Secondly, Yatra shifted its seat to high-margin offerings, a basket containing corporate airfares, accommodation bookings and travel packages.
Against typical industry practices, Yatra chose to ramp up its offerings via third-party promotions delivered through banking partnerships and marketing allies rather than resorting to heavy price cuts. Simultaneously, the company adjusted its product mix to encompass higher-margin offerings. As Shringi further details, ‘Hotels and packages bring in net margins in the ballpark of 11%, compared to an average of 3%-4% net margin for air. Our share of hotels and packages has jumped from about 15% to roughly 20% of gross bookings over the past year.’
These business maneuverings have had a positive impact on the company’s financial health. The shift to higher-margin products and the reduction in direct discounting not only fueled an increase in the company’s net margin but also improved its revenue-to-cost ratio. This marked an elevation over mere growth in gross bookings. Furthermore, Yatra reported an upward trend in gross bookings over the quarter, registering approximately a 9% increase in year-over-year bookings, thereby mitigating earlier downturns in total volume.
However, the recovery demonstrated variability across different segments: while air ticketing witnessed only modest growth, the company saw a surge in the hotels and packages segment. Determined to capitalize on this, Yatra is strategically cross-selling accommodations to its corporate clientele as a quick growth stimulant. Numerous recent corporate acquisitions have been ‘hotel-led,’ which means prospective clients initially used Yatra for hotel bookings before expanding to avail its wider range of travel services.
Currently, hotel bookings and travel packages offer Yatra the highest margins and are the easiest to cross-sell. This potential is especially evident in the corporate travel sector, marking a unique opportunity that Yatra is keen to exploit to its advantage. As per the company’s quarterly breakdown, Yatra reported a commendable growth in its numbers.
Revenue from operations witnessed an annual surge of 108%, amounting to INR 2.1 billion ($24 million) in the first quarter. Alongside this, the company’s Adjusted EBITDA experienced an annual leap of 138%, clocking at INR 249 million ($2.8 million). Net profit also saw an impressive surge, tapering off at an increase of 296% compared to the same quarter in the previous year, closing at INR 160 million ($1.8 million).
Further boosting its corporate-centric strategy, Yatra has continued to expand its corporate client list. The company onboarded 34 new corporate accounts during the recent quarter, ushering potential annual billings to the tune of INR 2 billion ($23 million). This constant drive to integrate more corporate clients into its services underscores Yatra’s commitment to its growth strategy.
Through these strategic business decisions, Yatra conveys its firm intention to solidify and expand its footprint in the booming corporate travel industry. By being at the forefront of digitization, maintaining long-lasting relationships with clients, and diversifying into high-margin products, the online travel company is set on a promising path towards a dominant role in the corporate sector.
The post Yatra Targets Corporate Travel Growth with Strategic Shifts appeared first on Real News Now.
About Author
