Indian web-based travel corporation, Yatra, is preparing to escalate its corporate travel operations. CEO and Whole Time Director, Dhruv Shringi, stipulated the firm’s concentration will be on high-value, recurrent corporate clientele, rather than transient, price-sensitive leisure tourists. The quarter ending June 30 saw Yatra experiencing a heightened contribution of gross bookings stemming from its B2B enterprise. Shringi disclosed an approximate 67% of the gross bookings were B2B-focused, with expectations of an increase towards 70% by the fiscal year-end.
Yatra is dedicatedly striving to become part and parcel of the routine for its corporate client base. This approach, according to Shringi, engenders ‘switching costs’, wherein integrated companies find it burdensome to sever their partnership. He pointed out that several rivals continue to cater to firms in a traditional, offline manner. However, Yatra’s strength lies in its profound technical assimilation with its clients along with a heightened penetration in the online space.
The company asserts that its in-depth tech integration and increased online reach serve as a catapult over its competitors. At a time when companies are briskly moving towards digitizing their travel processes, Yatra sees a massive opportunity for expansion. Shringi emphasized his competitors’ service delivery, which relies heavily on offline methods with minimal integration, as a reason for Yatra’s potential growth amidst the widespread digital adoption in the industry.
The previous year saw Yatra acquiring Globe All India Services or Globe Travels – a provider of corporate travel solutions. The acquisition, costing INR 1.28 billion ($15.25 million) in cash, fortified Yatra’s strategy focusing on long-term corporate customers. The longevity of relationships with major clients is an affirmation of the company’s resilience, according to Shringi. He cited, ‘Among our top 100 clients, 73 have been on board for over five years’.
Yatra highly esteems these enduring relationships since they promise a steady stream of revenue and operating leverage post the implementation of technical integrations. By choosing to cater to the wants of corporate clients over consumers’ demands, Yatra deviates from the usual path chosen by online travel platforms, which involves incentivizing consumers with discounts and marketing campaigns. Shringi proudly reported, ‘Our annual retention rate for corporate travel services is more than 97%, offering us high operating leverage in our business.’
Shringi credited two primary elements for their improved margin. Firstly, Yatra curbed direct discounts to clients. As opposed to hefty price reductions, the company significantly banked on promotions offered by banks and marketing collaborators. This strategic move of restricting direct discounting effectively curtailed Yatra’s customer acquisition costs. Secondly, the business model underwent a shift concentrating on higher-revenue generating products like corporate airfares, hotel bookings, and packages.
Shringi specified that ‘Hotels and packages have net margins of roughly 11%, in contrast to the 3-4% net margin earned through air services’. The proportion of bookings from hotels and packages, as compared to gross bookings, saw an increase from 15% to 20%, year on year. This shift in product preference had a positive impact on the company’s net margin and revenue-after-cost measurements, causing them to surpass the simple increase in gross bookings.
The quarter saw a year-on-year escalation in gross bookings by roughly 9%, in spite of prior dips in the total volume. This recovery, however, was skewed: air ticket sales experienced moderate growth, while hotel bookings and packages witnessed a more rapid increase. Yatra is currently relying on the selling of hotel services to its corporate clients as the primary immediate growth driver.
On numerous occasions, their recent corporative victories were ‘led by hotels’, in the sense that clients commenced their relationship with Yatra through hotel services, which subsequently unfolded into comprehensive travel services. Hotel bookings and packages are, as per current trends, the domains with higher margins and are also easier to cross-sell.
Focusing on the key numbers for the quarter, Yatra saw its Revenue from operations mark a 108% year-on-year growth, totalling to INR 2.1 billion ($24 million) in the commencement of the year. Their Adjusted EBITDA experienced a 138% year-on-year enhancement, reaching INR 249 million ($2.8 million). The net profit for the company amplified by 296% compared to the comparable period last year, settling at INR 160 million ($1.8 million).
Throughout the quarter, Yatra persistently expanded its corporate client foundation, and further added 34 new corporate accounts with an estimated annual billing capability of INR 2 billion ($23 million). A clear sign indicating that the company’s core strategy of focusing on high-value continuous businesses is driving their successful trajectory in the competitive online travel industry in India.
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