The online travel agency based in India, Yatra, is outlining a development strategy that places significant emphasis on its corporate travel division. According to the CEO and Director, Dhruv Shringi, the company is focusing on fostering relationships with high-value, repeat business clients rather than pursuing avenues that primarily target leisure travelers driven by cost. The rationale behind this strategy is rooted in Yatra’s strong performance in the B2B sector. During the quarter that ended in June 30, the company saw a greater proportion of its gross bookings coming from this area.
An impressive 67% of gross bookings during that period originated from B2B transactions. Shringi anticipates that this percentage could increase, possibly surpassing 70% by the time the fiscal year comes to a close. This projection is guided by Yatra’s ongoing endeavor to make its platform an integral part of its corporate clientele’s routines. Once a business has implemented and integrated Yatra’s platform into their processes, Shringi believes that a switch to a different provider would necessitate additional effort, termed ‘switching costs’
Interestingly, Shringi mentioned that a large number of their competitors continue to operate in an offline capacity with minimal integration with their clients. In contrast, Yatra has positioned itself with deeper technological integration with its clients, subsequently achieving higher online engagement. The company holds a strong belief that its high-level digitization gives it a competitive edge as businesses move towards implementing digital travel processes.
Shringi further underscored that this current comparison to competitors helps highlight a potential growth segment for Yatra, particularly in the realm of digital adoption which is becoming increasingly popular across industries. In line with this strategic focus, Yatra took a crucial step forward by acquiring Globe All India Services (Globe Travels) last year. Globe Travels is a provider of corporate travel services and was acquired at a cost of INR 1.28 billion ($15.25 million) in cash.
Central to Yatra’s future strategy are its longstanding corporate clients. Shringi cites the duration of relations with their main clients as a testament to the company’s effectiveness and appeal. A case in point is the fact that more than 70% of their top 100 clients have been loyal to Yatra for over five years. The company believes that such alliances provide a stable source of revenue and yield operational leverage once the technical integrations have been executed.
Unlike many online competitors who focused on acquiring consumers with discounts and aggressive marketing tactics, Yatra decided to take a different route. The company boasts an annual retention rate for corporate travel clients of more than 97%, a figure Shringi proudly states. This impressive statistic indicates that Yatra’s strategic focus away from price wars has allowed them to achieve substantial operational leverage within the business space.
Shringi attributes the company’s profitability to several key factors. Firstly, Yatra has been reducing the amount of direct discounting offered to clients. Instead of slashing prices, the company is banking more on offers made possible through affiliations with banks and marketing partners. Not only has this approach lowered Yatra’s customer acquisition costs, but it has also shifted their business mix towards higher-margin products.
Corporate airfares, hotels, and travel packages are now being prioritized due to their higher associated margins. Shringi shared that hotels and packages boast net margins of approximately 11%, in stark contrast to airfares which average between 3% and 4%. Over the past year, the proportion of gross bookings for hotels and packages has increased from 15% to 20%. These strategic shifts in business focus have led to increases in both Yatra’s net margin and revenue-after-cost figures.
As a result of these efforts, Yatra has seen an encouraging surge in gross bookings by about 9% year-on-year for the quarter, a significant improvement from previous declines in overall volume. While air ticketing has seen modest improvements, the company has experienced faster growth rates in the hotels and travel packages segment. Yatra’s emphasis on cross-selling these higher-margin services to their corporate customers has indeed been rewarding.
According to Shringi, several recent business wins were hotel-led, meaning that clients initially utilized Yatra for hotel bookings which subsequently laid the groundwork for a deeper engagement with additional services. Currently, hotels and packages provide the best cross-selling opportunities given their higher margins.
A peek at financial figures for the quarter reveals a 108% growth in revenue from operations. The figure stands at INR 2.1 billion ($24 million), while adjusted EBITDA rose by a remarkable 138% to INR 249 million ($2.8 million). Notably, the company’s net profits climbed by a whopping 296% to INR 160 million ($1.8 million) compared to the same period last year. This significant enhancement in Yatra’s financial performance reaffirms their adopted growth strategy.
To continue its growth trajectory, Yatra actively pursued expansion of its corporate client base during the reported quarter. A productive period resulted in the company securing 34 new corporate accounts, with an estimated potential yearly billing of INR 2 billion ($23 million). Given the rate of its ongoing success, Yatra’s strategic focus on corporate travel services and its dedication to heightened digital adoption underscore the immense potential for further developments.
To conclude, Yatra’s strategic approach leveraging business-to-business transactions and digital adoption provides a compelling example for other online platforms. Their focus on corporate client retention, instead of battling for market share through aggressive discounting, has shown a differentiated and successful approach to garner steady growth.
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