Yatra, an Indian online travel firm, is steering its business toward expanding its corporate travel segment. Dhruv Shringi, the CEO and Whole Time Director, revealed the company’s intention to concentrate more on high-value, recurring business customers as compared to price-sensitive occasional travelers. He explained that this approach offers more stability and potential for growth.
For the quarter ending June 30, there was a clear indication of increased gross bookings coming from its B2B division. Shringi shared that approximately 67% of total bookings were made by businesses, with an anticipated rise to 70% before the fiscal year closes. This inclination toward B2B, according to him, is a deliberate strategy to solidify the company’s position in the corporate travel sector.
To establish a firm client base, Yatra endeavors to create a reliable platform to become an integral part of its corporate customers’ routines. By doing so, it creates what Shringi refers to as ‘switching costs,’ the hurdle for companies looking to divest from a deeply integrated service provider. The objective is to make it more rewarding for businesses to remain with Yatra than to switch to other providers.
Highlighting the benefits of online operations, Shringi observed that many of Yatra’s rivals continue to offer services in an offline mode with limited customer integration. However, Yatra prides itself on its deep technical integration and a significant online presence. As more businesses move their travel processes online, this strategic positioning puts Yatra at a vantage point, the CEO said.
Expressing his outlook on upcoming opportunities, Shringi pointed out, ‘Most of our competitors still service customers in the offline manner with a minimal amount of integration. This provides us with a vast opportunity to exploit the digital adoption trend sweeping across the industry.’ With its digital-oriented approach, Yatra aims to tap into this growing trend and expand its customer base.
In line with its strategic goals, Yatra in the previous year announced its acquisition of Globe All India Services (Globe Travels), a company offering corporate travel services. The acquisition, which cost a total of INR 1.28 billion (around $15.25 million), was paid in cash. The move further indicates Yatra’s commitment to strengthening its corporate customer base.
Long-lasting relationships with corporate customers take center stage in Yatra’s business strategy. As evidence of the enduring customer loyalty that Yatra enjoys, Shringi presented a key data point – nearly 73 out of their top 100 customers have been with the company for over five years. The company believes these strong connections are instrumental in ensuring consistent revenue streams and efficient business operations, particularly after technical integrations have been realized.
Contrary to the conventional chase for individual customers with discounts and marketing campaigns, Yatra has strategically pivoted its focus towards corporate clients. Shringi proudly elucidated, ‘Our retention rate for corporate travel annually stands at over 97%. This is what provides us with high operating leverage in our business.’
Shringi pointed out two primary factors contributing to the company’s improving profit margins. Firstly, Yatra trimmed its direct discounting to customers. Instead of broad discounts, the company strategically shifted to offers via collaborations with banks and marketing partners, effectively reducing customer acquisition costs. Secondly, the product mix at Yatra underwent changes skewed towards higher-margin offerings, comprising corporate airfare, hotel bookings, and package deals.
Shringi highlighted the changing product mix, ‘Hotels and packages have net margins approximating 11%, this is contrasted by around 3%-4% net margin for air travel. The proportion of our gross bookings composed of hotels and packages has shifted from about 15% to nearly 20% on a yearly basis.’ These updates in strategy helped increase the firm’s net revenue and revenue-after-cost measurements beyond the growth in gross bookings.
The company reported around a 9% rise in gross bookings for the quarter compared to last year, reversing a previous decline in overall volume. The recovery, though, was not evenly distributed. Air ticketing saw mild improvements while hotel bookings and packages witnessed a faster growth rate. This has prompted the company to leverage hotel cross-selling to corporate clients as an immediate tactic for expansion.
Yatra’s recent corporate successes were largely ‘hotel-led,’ which means clients initially engaged the platform for hotel bookings, subsequently leading to wider use of its travel services. According to the company, hotels and packages current form the higher-margin, easier-to-cross-sell offerings.
Key performance numbers for the quarter include: a 108% year-on-year growth in operating revenue, reaching INR 2.1 billion ($24 million) in the first quarter. The adjusted EBITDA rose by 138% year-on-year to INR 249 million ($2.8 million). Net profit for the company increased by a whopping 296% compared to the same period last year, reaching INR 160 million ($1.8 million).
Emphasizing its commitment to grow, Yatra continued to shed light on its growth in the corporate domain and reported closing 34 new corporate accounts during the quarter. These accounts hold a potential annual billing of around INR 2 billion ($23 million). This demonstrates the firm’s aggressive pursuit of expanding its reach in the corporate travel sector and aligns with their long-term business strategy.
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