Yatra, a leader in India’s online travel industry, has clarified its intent to expand its corporate travel segment. The company’s Whole Time Director and CEO, Dhruv Shringi, highlighted a shift in focus, prioritizing high-value recurring corporate clientele rather than transient, price-conscious leisure travelers. Amidst the digital transformation of the industry, he recognized the strategic importance of the business-to-business (B2B) sector for sustained growth.
In the last fiscal quarter ending on June 30, the company experienced an increase in gross bookings via its B2B operations. Interestingly, Shringi revealed that B2B transactions accounted for an impressive 67% of gross bookings. He projects a potential rise to 70% of the total by the end of the current fiscal year, validating his B2B growth strategy.
The company’s emphasis on corporate travel can be attributed to its mission to entrench its platform in daily corporate procedures. This adoption triggers what Shringi identifies as ‘switching costs.’ He explained that these costs manifest as additional effort companies must exert to switch providers once they have integrated Yatra’s services into their operations.
Reinforcing Yatra’s competitive advantage, Shringi highlighted the company’s technological prowess and deeper digital integration compared to its competitors. He claims that the majority of competitors continue to provide services to companies in a more traditional, offline manner. Yatra’s advanced digital integration, on the other hand, provides vital support to corporations as they upgrade their travel processes in alignment with digital adoption.
Shringi underpinned this argument with the assertion that the competitors’ limited integration and reliance on offline methods presents Yatra with a golden opportunity. He believes that the company is well placed to capitalize on the digital wave sweeping across the travel industry.
In the previous year, Yatra demonstrated its commitment to growth in the corporate segment with the acquisition of Globe All India Services (Globe Travels). This provider of corporate travel services commanded a purchase price of INR 1.28 billion (roughly $15.25 million) in cash, indicating Yatra’s conviction in its strategy.
Long-term corporate clients have proven integral to Yatra’s ongoing success, as much of their business model centers on fostering enduring relationships. Shringi provided compelling proof in the longevity of their client relationships, stating, ‘Among our top 100 customers, 73 have maintained a relationship with us for a time span exceeding five years.’
The company posits these established relationships result in predictable revenue and operational leverage once the technical integrations are executed. It’s this stability and predictability that sets Yatra apart from other online travel platforms that have traditionally prioritized consumer acquisition using promotional tactics and discounts.
Shringi shared an impressive statistic to underscore this point, stating their annual retention rates for corporate travel reach a lofty 97%. He attributes a substantial portion of their successful operating leverage to this high level of client retention.
Yatra’s increased margins come from a two-pronged approach. Firstly, they significantly lessened direct discounts to consumers. The strategy was shifted towards promotions delivered through partnerships with banks and marketing partners, thereby decreasing customer acquisition costs.
The second strategy was a pivot in the business structure towards a focus on superior-margin offerings: corporate airfares, hotels, and packages. He noted, ‘The net margins for hotels and packages hover at about 11% in comparison to a 3%-4% net margin for airfare. Year over year, the mix of hotels and packages has increased from about 15% to about 20% of gross bookings.’
Guided by these dual strategies, Yatra has witnessed an increase in net margin and revenue-after-cost, growing beyond the raw expansion in gross bookings. For the fiscal quarter, the company recorded a year-over-year bump in gross bookings of about 9%, reversing prior dips in total volume.
The turnaround in volume, however, wasn’t consistent across all sectors: air ticketing saw modest improvement, whereas hotels and packages experienced more rapid growth. As a result, Yatra is emphasizing cross-selling hotels to its corporate client base as an immediate measure to promote growth.
In line with this strategy, several of the firm’s recent corporate acquisitions were ‘hotel-led’. This implies that the new clients initially started using Yatra for booking hotels, which consequently paved the way for further travel services. The company identifies hotels and travel packages as the highest-margin products that are easiest to cross-sell.
From a financial statistics perspective, the company reported a 108% year-on-year growth in revenue from operations to INR 2.1 billion ($24 million) for the first quarter. Additionally, the adjusted EBITDA swelled by 138% year-on-year to INR 249 million ($2.8 million). Net profit rose by a whopping 296% compared to the same quarter last year, reaching INR 160 million ($1.8 million). Lastly, Yatra continued to broaden its corporate client base, adding 34 new corporate accounts during the quarter, representing a potential annual billing of INR 2 billion ($23 million).
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