Yatra, a renowned online travel firm based in India, is charting a plan to expand its corporate travel division. The company’s Director and CEO, Dhruv Shringi, has unveiled the firm’s strategy which includes concentrating on high-value, returning corporate clientele as opposed to leisure travelers whose choices are mostly driven by price. The rationale behind this is that the former is likely to provide more consistent revenue streams.
There was significant evidence of this shift in strategy during the quarter ending June 30. The share of gross bookings arising from the company’s B2B operations showcased a palpable increase. Shringi reported that nearly 67% of total bookings were B2B, a figure he projected could reach 70% by the completion of the fiscal year.
A pivotal part of Yatra’s strategy is a concerted effort to seamlessly integrate its platform into the daily operations of its corporate customers. Shringi coined the term ‘switching costs,’ referring to the additional efforts required by a corporation to disintegrate from Yatra’s platform once it has been fully adopted. Such a robust integration would undeniably make Yatra an integral part of these corporations.
Interestingly, according to Shringi, many of Yatra’s industry competitors still operate in a largely offline manner, striking stark differences to Yatra’s digitally integrated business model. He held that Yatra’s heavy emphasis on technology allows for a deeper penetration into the market combined with a superior level of integration with its customers.
Yatra’s unique selling proposition lies in its digital savvy. The company is geared to take advantage of the increasing trend towards digitizing various processes within the travel industry. Shringi articulated that there exists a broad window of opportunity for Yatra to cater to this accelerating digital adoption happening across the industry.
In line with this agenda, Yatra announced an acquisition last year. It purchased Globe All India Services (Globe Travels), a company specializing in corporate travel services. The acquisition, a cash deal that commanded INR 1.28 billion ($15.25 million), enabled Yatra to consolidate its commitment towards serving corporate clientele.
Affirmed by Shringi, corporate customers of long-standing relationships form the fulcrum of Yatra’s strategy. Notably, the vast majority of their top clients exhibited impressive retention rates which speak volumes about the ‘stickiness’ of the company’s customer relationships.
Shringi threw light on an impressive statistic – of their top 100 clients, 73 have sustained their association with Yatra for over five years. According to Yatra, these enduring relationships pave the way for steady revenue streams and offer operational leverage once the integration with the technology is firmly established.
In a market where most online travel platforms are vying for the attention of consumers with attractive discounts and targeted marketing, Yatra has adopted a different approach. Their focus on corporate travel has seen an annual retention rate exceeding 97%, a figure that augments their operating leverage significantly.
Shringi identified two pivotal factors that have contributed to Yatra’s improved margins. First, they have curtailed direct discounting, instead utilizing offers promoted by banking partners and marketing associates which substantially reduces Yatra’s customer acquisition expenses. Second, there has been a visible shift in the business mix towards products that garner higher margins – specifically, corporate airfares, hotels, and packages.
Shringi elaborated on the net margin trends associated with different travel services. ‘Hotels and packages provide a net margin of about 11%, which is significantly higher than the 3%-4% net margin from air services,’ he pointed out. This factor, coupled with a year-over-year change in the mix of hotels and packages from 15% to 20% of gross bookings, has effectively fueled growth in the company’s net margin.
The positive impact of these strategic adjustments was reflected in Yatra’s performance metrics. The company witnessed approximately 9% year-over-year growth in gross bookings for the aforementioned quarter, counterbalancing previous decreases in overall volumes. The comeback, however, was characterized by a greater momentum in the hotels and packages sector compared to air ticketing.
Yatra recognizes the potential of cross-selling hotels to their corporate customers as an immediate growth strategy. They have recently experienced several ‘hotel-led’ wins, wherein customers initially used Yatra for hotel booking, opening the gates for Yatra to provide them a wider range of travel services.
Currently, Yatra finds the ‘hotels and packages’ segment to be the most profitable with the added advantage of being easier to cross-sell. This is indicative of the company’s ability to swiftly adapt to evolving market conditions and consumer preferences.
A quick overview of Yatra’s key performance metrics from the recent quarter releases: Revenue from operations soared by 108% year-on-year to reach a notable INR 2.1 billion ($24 million). Adjusted EBITDA too showed a sharp ascent of 138% from the previous year, amounting to INR 249 million ($2.8 million). Unitedly, the company’s net profit rose mighty high with a 296% year-over-year increase, settling at INR 160 million ($1.8 million).
Simultaneously, Yatra didn’t hold back its efforts to diversify and expand its clientele. The company was successful in securing 34 new corporate accounts during the said quarter. This move is forecasted to bring in potential annual billing of approximately INR 2 billion ($23 million), solidifying the company’s position in the corporate travel business.
The post Yatra’s Strategic Shift Targets High-Value Corporate Travel appeared first on Real News Now.
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