Yatra, a leading online travel company in India, is gearing up to expand its operations in the corporate travel sector. The company’s CEO, Dhruv Shringi, outlined a strategic approach focusing on high-value, regular corporate clients rather than consumers enticed by low-cost leisure travel. Such a focus has been deemed more advantageous as it caters to more lucrative business-to-business (B2B) transactions. By the end of the fiscal year, Shringi estimates that nearly 70% of all bookings will be facilitated via the B2B model, given that about 67% of bookings from the quarter ending June 30 were already coming from this sector.
With the aim to become a regular part of their corporate clients’ routines, Yatra is committed to increasing its switching costs. In this context, ‘switching costs’ refer to the added efforts required for a company to switch service providers once they’ve established a steady system with one. Shringi believes that the majority of competitors servicing these businesses still rely on traditional offline methods, making Yatra’s technically proficient system a standout in the market.
Arguing the advantage of having a higher level of technological integration and online penetration, Yatra believes it holds the upper hand as businesses evolve their travel processes in line with today’s digital era. These digital transformations in the industry present a significant opportunity for Yatra to increase its market penetration. Shringi explained that their competitors primarily service clients using offline processes, with minimal digital integration, presenting a substantial opportunity for growth.
Yatra’s quest to expand its corporate travel services was manifested in its acquisition of Globe All India Services (Globe Travels) in the previous year. The deal, amounting to INR 1.28 billion ($15.25 million), was a cash transaction. Yatra considers this acquisition a testament to their dedication to sustaining long-term corporate clients, a central tenet of their business strategy.
It is the lasting relationships with these clients that Yatra believes are a testament to their reliability and effectiveness as a service provider. Shringi highlighted, ‘Out of our top 100 clients, 73 have chosen to stay with us for a period exceeding five years.’ Yatra’s belief is that these partnerships yield consistent revenue and operational leverage following the implementation of technical integrations.
In a departure from the norm, Yatra has eschewed the commonly followed practice of luring clients with hefty discounts while harnessing a significant customer retention rate. The company’s annual corporate customer retention rate stands well above 97 percent. According to Shringi, such high retention contributes to the substantial operational leverage that Yatra enjoys.
Shringi identified two main factors contributing to an increase in profits. To start with, Yatra has limited the frequency of direct discounts given to customers. The company now focuses more on promoting offers through bank partnerships and marketing collaborations, significantly reducing customer acquisition costs. Secondly, Yatra has gradually shifted their business emphasis towards higher-profit products such as corporate airfares, hotels, and packages.
Shringi stated, ‘Hotels and packages yield net margins of approximately 11%, compared to net margins of about 3% to 4% for flights. Over the last year, the mix of hotels and packages increased from about 15% to nearly 20% of gross bookings.’ This evolution in business strategy has enhanced the company’s net margin and revenue figures, surpassing the raw growth in gross bookings.
Demonstrating strong recovery, Yatra reported a 9% increase in gross bookings year-over-year in the last quarter, counteracting previous downward trends in total volume. The recovery trend depicted uneven patterns, with modest improvements in air ticketing and robust growth in the hotels and packages category. To leverage immediate growth opportunities, the company focuses on cross-selling hotel accommodations to corporate customers.
Highlighting the company’s recent successful corporate partnerships, Shringi described them as ‘hotel-led,’ indicating that clients initially used Yatra for hotel bookings, which then expanded to complete travel services. The ‘hotels and packages’ bracket currently represents the higher margin, easy-to-cross-sell segment for Yatra.
Turning to the performance statistics for the quarter under review, Yatra reported a substantial surge in its revenue from operations. The figure soared by 108% year-on-year, reaching INR 2.1 billion ($24 million). In tandem, the adjusted EBITDA experienced a 138% year-on-year boost, amounting to INR 249 million ($2.8 million). Further recording an uptick, the net profit skyrocketed by 296% year-on-year to INR 160 million ($1.8 million).
As part of continued efforts to broaden its corporate clientele, Yatra onboarded 34 new corporate accounts during the latest financial quarter. These newly secured accounts promise potential annual billings of INR 2 billion ($23 million).
By emphasizing a consistent corporate client base, forward-thinking digital integrations, and desirable service offerings, Yatra seeks to position itself favorably amidst the evolving landscape of corporate travel. This shift in strategy is not only manifesting in remarkable financial improvements, but it is also setting a precedent for other online travel companies to focus on lucrative B2B transactions, leveraging their technological prowess.
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