Yatra, a leading online travel company in India, is gearing up to amplify its corporate travel portfolio. Dhruv Shringi, the CEO and Whole Time Director, has outlined future plans, proposing the company intends to concentrate on valuable, regular corporate clients instead of transient leisure customers swayed by cost. This is part of the strategic shift being deployed for the continued growth of the company.
In the quarter concluded on June 30th, Yatra observed an increasing proportion of gross bookings originating from its corporate client side of operations. According to Shringi, approximately 67% of the gross bookings were tied to their B2B segment, a figure he anticipates could further escalate to around 70% by the fiscal year’s end.
The aspiration for Yatra is to be ingrained in the everyday functioning of their corporate clients. Integration of this depth spawns what Shringi referred to as ‘switching costs’ – the additional undertaking for a company to disconnect once locked into the eco-system. This, he argues, is a significant factor in fostering enduring customer relationships.
Shringi pointed out that the majority of the competitors in this space still lean heavily on traditional offline methods to accommodate corporate clients. On the contrary, Yatra boasts of intensive technical incorporation with their clients along with superior online penetration. The company asserts that these facets bestow a competitive edge especially as businesses are eagerly digitizing travel operations.
Shringi argued that a large part of market competitors still falls back on antiquated offline servicing with bare minimum integration with clients. Yatra sees this as an immense opportunity to aggressively pierce into the escalating digital inclination that is sweeping the industry.
In the previous year, Yatra revealed its acquisition of Globe All India Services (Globe Travels), a firm specializing in corporate travel services. The deal amounting to INR 1.28 billion ($15.25 million) was settled in cash. This acquisition underlines the importance of corporate clientele in Yatra’s strategy.
Existing corporate clients are crucial to Yatra’s operational blueprint. Shringi highlighted the consistent patronage of big clients as evidence of the company’s ability to retain customers. ‘Out of our top 100 clients, 73 have been loyal to us for more than five years,’ he noted.
Maintaining such relationships is believed by Yatra to reliably deliver steady revenue and provide operating leverage once the technical integrations are in effect. While many online travel firms pursue consumer-focused strategies like offering discounts and marketing, Yatra has chosen a different tactic.
The strategy deployed by Yatra diverges from the usual focus on consumers using incentives like discounts, rather aiming to foster stable relationships with corporate clients. Shringi reported, ‘Our annual retention rate (for corporate travel) is exceeding 97%,’ a figure that contributes to high operational leverage.
Shringi brought to the fore two primary contributors to margin improvement. Initially, Yatra curtailed direct discounting to customers. Instead, the company shifted towards offering deals through banking partners and marketers, a move that significantly reduced Yatra’s cost of customer acquisition.
Secondly, the company had a strategic shift towards higher-margin products such as corporate airfares, hotels, and packages. Shringi pointed out, ‘Our mix of hotels and packages, year over year, has moved from about 15% to about 20% of gross bookings, leading to net margins closer to about 11%, as against around 3%-4% net margin for airfares.’
Adopting these strategies catalyzed enhancement of the company’s net margin and revenue-after-cost measures, successfully surmounting the raw growth in gross bookings. Yatra clocked a year-on-year increase in gross bookings by around 9% for the quarter, counteracting earlier volume dips.
However, this recovery was not uniform across all segments. Air ticketing depicted a slight upward trend, meanwhile, hotels and packages recorded faster growth. Yatra perceives selling hotels to corporate clients as an immediate growth lever, with a view towards broadening its range of services in the future.
One of the milestones for Yatra was the success in ‘hotel-led’ corporate clients, wherein customers initially engaged Yatra for hotel bookings, subsequently leading to further patronage for a wider range of travel services. Currently, hotels and package services are Yatra’s high-margin products that prove easier to cross-sell.
Sharing some of the important figures for the quarter, the operating revenue catapulted by 108% year-on-year to INR 2.1 billion ($24 million). The Adjusted EBITDA shot up by 138% year-on-year to INR 249 million ($2.8 million). Additionally, the company’s net profit soared up by 296% relative to the same period the previous year, reaching INR 160 million ($1.8 million).
Continuing expansion of corporate clients was seen as Yatra sealed deals with 34 new corporate accounts in the quarter. The potential annual billing from these accounts is estimated to be around INR 2 billion ($23 million). Staying consistent with its strategy, Yatra’s focus on corporate bookings is leading it toward a promising future.
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