Yatra, the Indian digital travel company, is projected to amplify its corporate travel sector. CEO and Whole Time Director Dhruv Shringi articulated that the firm’s prime focus would be those corporate clients who provide high value and recurring business, and not as much on the sporadic, price-sensitive leisure customer. The most recent quarterly report dated June 30 showcased Yatra’s substantial growth in the B2B sector. As per Shringi, approximately 67% of the casino’s gross bookings were credited to their B2B operations and he anticipates a rise to potentially 70% by the fiscal yearend.
The organization is striving to become an integral part of its corporate clientele’s regular workflows. This consistent integration comes with ‘switching costs’ as Shringi terms it, implying that a company may resist change owing to the increased efforts involved in shifting once fully integrated. Shringi observed that the majority of their competition still services firms through offline methods. According to Yatra’s stance, it has a more profound technical synergy with its clients and a more significant online presence.
The company believes that its deeper technical liaison with clients and greater online penetration give Yatra a competitive advantage as firms transition towards digital travel processes. Shringi stated that their diverse competitors still rely heavily on offline methods with less integration, leaving a broad spectrum of opportunities for Yatra to tread and amplify its digital footprint. This is because mass digital inclusion is becoming an industry norm.
In recent history, Yatra declared the acquisition of Globe All India Services, a corporate travel service provider, in a cash deal of INR 1.28 billion ($15.25 million). Long-standing corporate patrons lie at the heart of Yatra’s business model. The company’s ‘stickiness’ is apparent from its long-term clients’ loyalty. Shringi cited that out of their top 100 customers, 73 have maintained a business relationship for over five years.
Yatra is of the opinion that these enduring relationships offer stable revenue streams and managerial leverage once the technical integrations are executed. While other online travel platforms were busy luring consumers with discounts and advertising, Yatra chose a different strategy. Their exceptional annual retention rate for corporate travel stands at over 97%, as Shringi states, envisioning this aspect as a significant component towards high operational leverage in the business.
Shringi identifies two primary drivers contributing to margin enhancement. First, Yatra decided to cut back on direct concessions to its customers. Instead of huge price reductions, the firm shifted reliance onto offers presented via banks and promotional partners. This move led to a decrease in Yatra’s customer acquisition cost. Second, the business began leaning more toward higher-margin products such as corporate airfares, hotel deals, and packages.
Shringi highlighted that hotel and package deals have net margins that are roughly around 11%, which is substantially higher than the 3%-4% net margin from airfare. It was revealed that their inclusion of hotels and packages has escalated year by year from about 15% to approximately 20% of gross bookings. This shift has been instrumental in driving up the company’s net margin and revenue-after-cost metrics, elevating them higher than the direct growth in gross bookings.
Yatra declared a year-on-year augmentation in gross bookings by nearly 9% for the quarter, marking a positive shift from the earlier decreases in overall volume. However, the recovery hasn’t been consistent across the board: air ticketing showed moderate progress, while growth in hotels and package bookings were more remarkable. The firm is currently putting emphasis on the cross-sell of hotels to its corporate clients to leverage instant growth.
Some of their latest corporate gains were ‘hotel-led’, which means clients initially used Yatra for their hotel bookings which subsequently paved the way to additional travel services. Currently, hotel and package bookings serve as the high-margin products for Yatra that are easily cross-sold. During the quarter, the firm saw its operational revenue grow by a whopping108% yearly to INR 2.1 billion ($24 million) for the first quarter.
The company’s Adjusted EBITDA witnessed a year-on-year surge of 138% amounting to INR 249 million ($2.8 million). Additionally, compared to the same quarter last year, the company’s net profit saw a considerable rise; it jumped 296% up to INR 160 million ($1.8 million). All while continuing to expand their corporate client circle.
Throughout the quarter, Yatra onboarded 34 fresh corporate accounts. This addition possesses the potential for an annual billing of approximately INR 2 billion ($23 million). It’s evident, Yatra’s strategies and operations show a clear focus on integrating and retaining high-value corporate customers, primarily through technical integrations, higher-margin products, and outstanding services.
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