The India-based internet travel agency, Yatra, has announced its intent to further develop its corporate travel sector. Its CEO and Whole Time Director, Dhruv Shringi, outlined their strategic vision, with the emphasis being placed on building relationships with high-value corporate clients who maintain recurrent business dealings rather than seeking out clients who primarily make choices based on cost. In a financial report for the quarter ending on June 30th, Yatra shared that a greater percentage of its gross bookings were concentrated in its B2B sector. Therein, Shringi stated that roughly 67% of their gross bookings came from the business-to-business segment, and he predicted that the figure could potentially escalate to approximately 70% by the end of the fiscal year.
Yatra is making strides towards integrating their platform into the regular operations of their corporate clients, establishing what Shringi labels as ‘switching costs’. In essence, this creates a scenario wherein a company finds it inconvenient and effort-intensive to shift away from Yatra’s platform once they have incorporated it into their regular operations. In contrast to most of its competitors who continue to service companies in traditional offline manner, Yatra prides itself in offering deeper technical integration with customers and enhanced online penetration.
The company strongly believes that such advancements confer upon it a competitive advantage, particularly in the present era wherein companies are progressively digitizing their travel operations. Shringi pointed out that their competitors were still largely providing offline services with minimal integration, disclosing a widespread opportunity for Yatra to capitalize on the ongoing digital transformation across the industry.
The previous year saw Yatra make strategic advancements by acquiring Globe All India Services (Globe Travels), a provider of corporate travel services, for a sum of INR 1.28 billion ($15.25 million) in cash. This acquisition signaled their investment in long-term relationships with corporate clients, which Yatra identifies as a crucial facet of their business strategy. Shringi underscores this fact by pointing out that a healthy proportion of their key clients have been engaging with the company for over five years.
He asserts that, out of their top 100 clients, 73 have been consistent customers for more than five years, demonstrating the strong bonds the company has been able to maintain. The company interprets these enduring relationships as a sign of their service’s stickiness, predicting the potential for steady revenue and operational leverage once technical integrations are well settled.
While most online travel platforms court consumers with bountiful discounts and aggressive marketing, Yatra has chosen a divergent path. Their annual retention rate for corporate travel is reported to stand solidly above the 97% mark. Shringi points out that this impressive retention rate provides the business with high-operating leverage.
Shringi attributes two main factors as drivers that have improved the company’s margin. Firstly, Yatra has dialed back on direct discounting to customers. Instead of engaging in intense price competition, the company has opted to put a greater emphasis on offers delivered in collaboration with banks and marketing allies. This strategic shift has successfully brought down Yatra’s customer acquisition costs.
Secondly, shifting the business orientation towards higher-margin products like corporate airfares, hotels, and travel packages has facilitated this margin improvement. As per Shringi’s commentary, hotels and package deals generate net margins closer to 11%, as opposed to air travel’s net margins of around 3% to 4%. The mixture of hotels and packages in Yatra’s portfolio has experienced a five-percentage-point increase from 15% to 20% of gross bookings, year over year.
These strategic shifts have been integral in bolstering the company’s net margin and revenue-after-cost measures, surpassing the raw growth in gross bookings. Yatra’s recent financial disclosures highlight an annual rise of 9% in gross bookings for the quarter, effectively overturning prior downward trends in overall volume. Their performance was, however, marked by mixed recovery, with marginal air ticketing increments but faster growth of hotels and package deals.
Yatra is currently exploiting the potential of selling hotels to their corporate clientele to underpin immediate growth. Indeed, their recent corporate deals were initiated by customers first using Yatra for hotel bookings, thereby laying the groundwork for introducing broader travel services. Yatra finds hotel and package deals to be both higher-margin and easier to cross-sell.
Looking at Yatra’s performance on the quarter, some key figures project a positive picture: Revenue from operations shot up by a significant 108% to INR 2.1 billion ($24 million) year-on-year. Adjusted EBITDA also showed a rapid increase, surging 138% to INR 249 million ($2.8 million) in comparison to the same period in the previous year. Furthermore, its net profit rocketed up by 296% to INR 160 million ($1.8 million) year-on-year.
In line with their corporate-centric strategy, Yatra continued to augment its corporate client base, closing 34 new corporate accounts over the quarter. These new additions represent potential annual billing of INR 2 billion ($23 million).
Yatra’s progression is predicated on pursuing higher value, recurrent corporate clients while refining its operational strategies. By investing in technological capabilities and focusing on products with a higher margin, the firm has capitalized on the increasing digital transformation underway in the travel industry. As demonstrated with their positive financial results and client growth, such strategies are already beginning to yield rewarding returns.
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