Yatra, a leading Indian digital travel firm, is in the process of augmenting their focus on the high-value recurring corporate clients. This shift towards the corporate travel segment is being led by Dhruv Shringi, the CEO and Whole Time Director. Instead of chasing highly competitive pricing demands of the occasional leisure traveler, Shringi emphasized on higher returns offered by corporate clients. This contrasts against the industry famous for its fierce price battles, often at the cost of profit margins.
The transition to concentrate on corporate customers shows in their recent quarterly report. End of June quarter revealed a considerable chunk of gross bookings coming from their B2B enterprise. The CEO mentioned that out of total bookings, around 67% originated from B2B. He predicts this number could rise to nearly 70% by the end of fiscal year, indicating a clear focus on this segment.
Yatra is also aiming to seamlessly integrate its platform into the daily workflow of its corporate clients. According to Shringi, this strategy leads to the generation of ‘switching costs’. Essentially, this term refers to the extra efforts a company would have to go through to shift away once they’ve adapted to Yatra’s platform. In other words, this strategic approach enhances customer loyalty for Yatra in the corporate sector.
Yatra stands out against its competitors that primarily operate through offline channels. The online travel firm prides itself on its advanced technical integration capabilities with clients as well as its extensive internet penetration. The company contends that this puts it in a favorable position for businesses seeking to digitize their travel processes.
Shringi believes that Yatra is exceptionally well-positioned to take advantage of the digital adoption wave sweeping across the industry. He mentioned, ‘Most of our competitors offer services in a traditional ‘offline’ manner with barely adequate integration. We see this as an opportunity to deepen our penetration into the market by leveraging on ongoing digital trends.’
Yatra further solidified its position in the corporate travel market last year by purchasing Globe All India Services (Globe Travels), a firm providing corporate travel services. The acquisition, priced at INR 1.28 billion ($15.25 million), was made in an all-cash deal. This demonstrated a strong commitment to long-term corporate client relationships.
Longevity within corporate customer relationships is key to Yatra’s growth strategy. Shringi highlighted the lengthy associations they had with their biggest clients as proof of their reliable service. He pointed out that out of their top 100 clients, 73 have been loyal for more than five years, showcasing the firm’s retention power.
Such enduring relationships, the company believes, allow for a stable flow of revenue and operating leverage once technical integrations are established. Unlike other online travel platforms which have often depended upon consumer discounts and strong marketing efforts, Yatra has chosen a different path. Shringi mentioned an impressive annual retention rate of over 97% in their corporate travel segment, which provides the firm with substantial operating leverage.
There were two primary tactics used by Yatra to enhance their profit margins. Firstly, instead of resorting to heavy discounts to acquire customers directly, the company successfully relied on deals offered through banking partnerships and marketing collaborators. Shringi credited this approach for substantially reducing the company’s cost of acquiring new users.
Yatra’s second method to increase profits was by shifting their business towards higher-margin products, including corporate airfares, hotel reservations, and vacation packages. Shringi elaborated, ‘Compared to the 3-4% net margin for air travel, hotels and packages provide net margins of almost 11%. Over time, our mix of bookings has evolved from about 15% to nearly 20% for hotel reservations and package tours.’
Both these strategies contributed significantly to improving Yatra’s net margin and revenue-after-cost metrics. When compared to the mere growth in gross bookings, there was a notable impact. During the quarter in review, Yatra reported a year-on-year rise in gross bookings of about 9% which marked a turnaround from previous declines in overall volume.
The recovery seems to be fragmented – there was modest progress in air ticketing, while the segments of hotels and packages witnessed more rapid growth. Yatra is banking on the cross-selling of hotels to their corporate customers as a short-term growth stimulus. As per CEO, several of their recent successes with corporate clients have been ‘hotel-led’, implying customers end up using Yatra for more extensive travel services after initially booking hotels through them.
The company’s key performance indicators during the quarter under review were highly encouraging. Revenue from operations rose by 108% year-on-year to stand at INR 2.1 billion ($24 million). Additionally, the Adjusted EBITDA increased by 138% year-on-year to INR 249 million ($2.8 million). Yatra’s net profit also saw a tremendous growth of 296% year-on-year to INR 160 million ($1.8 million).
Yatra further focused on expanding its corporate customer base. The company was able to secure 34 new corporate accounts during the last quarter, which has a potential of an annual billing amounting to INR 2 billion ($23 million). These figures clearly state the potential and success of Yatra’s strategic shift towards the corporate travel segment.
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