With a strategic vision for growth, Yatra, one of India’s eminent online travel companies, is undertaking new steps to increase its foothold in the corporate travel sector. CEO and Full-Time Director Dhruv Shringi asserts the firm’s aspirations are anchored in tapping into reliable, repeat corporate clients as opposed to fleeting, value-oriented casual tourist traffic. Over the recent quarter ending on June 30, Yatra has seen a considerable influx in its gross bookings stemming from B2B transactions. Mr. Shringi disclosed that approximately 67% of total gross reservations originated from its B2B sector, and anticipates this proportion might rise towards 70% in alignment with the close of the financial year.
Yatra is working diligently to weave its digital platform into the regular operations of corporate clientele. The aim of this initiative, according to Shringi, is to construct ‘switching costs’ that impose additional burdens on corporations when they wish to transition away after embedding Yatra into their system. He stressed that a majority of their competitors are still serving corporations through offline channels. Yatra is establishing its dominance in the market with a comprehensive online presence and enhanced digital interfacing with its customers.
Yatra contends that its deep digital interface with customers and well-established online penetration equips it with a unique competitive advantage, as companies navigate the digital transformation of their travel arrangements. Shringi asserts that the high degree of offline service with limited integration among their rivals provides Yatra with a lucrative opportunity to facilitate the uptake of the ongoing industry-wide digital transformation.
Taking a step further in enriching its corporate travel business, Yatra proclaimed last year the acquisition of Globe All India Services, which is known as Globe Travels – another prominent name in the world of corporate travel service providers. The procurement deal was reportedly settled for INR 1.28 billion, equivalent to approximately $15.25 million, paid in cash.
Long-term corporate clients are the foundation of Yatra’s growth approach, affirms Shringi. He identifies the extended duration of partnership with the big-name clients as the testament to the company’s appealing stickiness. As an example, he mentions, “73 of our top 100 customers have maintained a business relationship with us for a span exceeding five years.” These longstanding links, he believes, generate a steady flow of income and operational leverage following the completion of technical integration.
Contrary to the conventional approach of luring customers with promotional offers and advertising taken up by online travel platforms, Yatra adopted a different strategy altogether. For Yatra, the primary focus has been on client retention rather than acquisition. With an impressive annual retention rate surpassing 97% in the corporate travel sphere, Yatra has managed to secure robust operational leverage.
Elaborating on the factors contributing to the improvement in margin, Shringi details that the reduction of direct discounting to customers formed a significant part of the approach. Rather than sweeping price reductions, Yatra chose to build customer loyalty through promotional offers rolled out in partnership with banks and marketing affiliates, thereby, reducing its customer acquisition expenses.
Alongside this cost-saving move, Yatra shifted its business operation towards higher-margin offerings. These include corporate flight tickets, hotels, and package deals. Shringi highlighted that ‘hotels and packages’ division holds a net margin of approximately 11%, as compared to the air division that has a net margin between 3% and 4%. Over the last year, the ‘hotels and packages’ transactions have increased from 15% to 20% of gross bookings.
The strategic modification of Yatra’s business model played a critical role in elevating the company’s net margin and revenue-expenditure ratio. Even in instances where its gross bookings saw modest growth, the company was still able to register revenue growth, leading to improved performance metrics. Yatra recorded a 9% growth in gross bookings over the previous quarter, countering the downturn in total bookings.
The recovery in performance, however, was somewhat unequal: while air tickets witnessed modest growth, hotel bookings, and packages outperformed. Disparate performance patterns have led the company to consider cross-selling hotel services to corporate customers as a potential short-term growth strategy.
Several of Yatra’s recent triumphs in corporate client acquisition were led by the hotel booking services. Essentially, clients initiated their engagement with Yatra for hotel reservations, which subsequently opened avenues for a broader spectrum of travel-related services. From this perspective, hotel services and package offers emerge as higher-margin products that Yatra can more conveniently cross-sell to its customers.
For the recent quarter, Yatra posted an impressive operational revenue growth of 108% year-on-year, reaching INR 2.1 billion ($24 million). Adjusted EBITDA followed a similar upward trajectory, registering an increase of 138% year-on-year to stand at INR 249 million ($2.8 million). Moreover, Yatra experienced an exceptional increase in its net profit by a whopping 296% compared to the same period last year, with the figure touching INR 160 million ($1.8 million).
Simultaneously, the company bolstered its list of corporate contacts by finalizing deals with 34 new corporate accounts over the course of a single quarter. These additional accounts represent a potential forecasting of annual billings to be worth INR 2 billion ($23 million).
With the digital adoption wave washing over the corporate sector, Yatra’s growth strategy involves fully leveraging its technical integration capabilities. Yatra’s plan pits them against competitors who are still leaning heavily on offline servicing, making this a significant opportunity.
The acquisition of Globe Travels further positions Yatra as a serious contender in the corporate travel service market. Long-standing corporate clientele and a favourable business mix-focused on higher-margin products help Yatra land a strong position in the competitive landscape.
In conclusion, Yatra’s strategic shifts and its focus on corporate client retention rather than discount-driven customer acquisition have positioned the company for higher profitability and sustained growth. The latest financial numbers resonate with this strategy, indicating a successful implementation of a refreshed business model.
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