Yatra Shifts Focus to Corporate Travel Sector

Yatra, a notable player in the e-travel field in India, is setting its sights on an intensified focus within the niche area of corporate travel. Emphasizing the valuable, often habitual nature of corporate clients as opposed to fluctuating leisure travelers, the firm’s CEO and Whole Time Director, Dhruv Shringi articulated this as the coming tactical shift. Capping the company’s aim to attract and retain higher-tier, repeated transactions from business clientele, it hopes to veer away from the instability in leisure traffic which is primarily steered by price variations.

In the past quarter, ending on June 30, Yatra observed a solidified role of its B2B ventures, reflecting in the amplification of their gross bookings. As explained by Shringi, approximately 67% of the gross bookings were procured from their B2B operations. He adds that this ratio could potentially rise to 70% by as the fiscal year concludes.

In an attempt to engender a sense of habit in using their platform amongst their corporate customers, Yatra is honing in on making its services part of their usual practice. This tactic results in creating ‘switching costs’, thereby indicating the additional exertion required for a firm to shift after integrating into Yatra’s services, as elucidated by Shringi.

While the majority of its market competition continues to serve firms using traditional, offline files, Yatra stands apart due to its substantial technical integration with its clients, leading to a heightened online penetration. They reason that this offers them an advantage as companies move towards digitizing their travel procedures.

Most market competitors are still entrenched in the old-school practice of serving the customers offline, with barely any integration. This provides us with a golden opportunity to penetrate the increasing trend of digital adoption proliferating across the industry, added Shringi, signaling Yatra’s readiness to exploit the digital wave.

Demonstrating their strategic purpose, Yatra reported its acquisition of Globe All India Services (Globe Travels) in the previous year; a mock-up corporate travel services provider for INR 1.28 billion ($15.25 million) in straight cash. This acquisition underlines the firm’s emphasis on securing long-term corporate partnerships.

The reinforcement of existing client relationships is exemplified by the client tenure amongst major associates, predominantly marking Yatra’s ‘stickiness’. To give an idea about our client loyalty, if we consider our top 100 clients, we have framed a lasting relationship with 73 of them that exceeds five years, Shringi claimed.

Yatra’s confidence in their strategy stems from the predictable revenue streams and operational leverage that sturdy customer relationships enable in the long run. Especially once the necessary technical integrations have been set in motion. The annual retentivity rate for our corporate clients tends to exceed 97%, an index significantly contributing to our high operational leverage in business, added Shringi.

While numerous online travel platforms are luring consumers with tempting discounts and strong marketing, Yatra’s strategic approach is different, opting for consistent corporate clients instead. This strategy is yielding fruitful results, as evidenced by the improving metrics.

Two primary components driving the improvement in margin are reduced direct discounting to customers and a shift in the business mix towards higher-margin products such as corporate airfares, hotels, and packages. Shringi adds, Hotels and packages have net margins closer to about 11% compared to about 3%-4% net margin for air. Over the years, our mix of hotels and packages has transitioned from about 15% to roughly 20% of gross bookings.

Thanks to this strategy shift, Yatra demonstrated higher revenue-after-cost metrics and net margin, as opposed to the raw growth in overall gross bookings. The gross bookings reported by the company for the quarter showed a jump by 9% from the previous year, nullifying earlier reductions in total volume.

The growth during the period was not homogeneous across all divisions; air ticketing exhibited a subtle climb, while the hotels and packages division expanded at a more rapid scale. The cross-selling of hotels to existing corporate clients are anticipated by the firm to act as an instant growth lever.

Yatra’s corporate victories in the recent past were predominantly hotel-led, meaning corporate clients initially utilized Yatra for hotel bookings, subsequently availing broader travel services. It is apparent that hotels and packages currently represent the higher-margin, and easier-to-cross-sell products for Yatra.

When considering the performance metrics for the quarter, Yatra enjoyed considerable growth. The operation revenue witnessed a leap of 108% year-on-year, clocking at INR 2.1 billion ($24 million). The adjusted EBITDA soared by 138% in the same period to reach INR 249 million ($2.8 million), and a sturdy net profit growth of 296% compared to the same period last year was noted, with a total of INR 160 million ($1.8 million).

Yatra underscored its continuous dedication to expand its B2B client base, ending the quarter with an additional 34 corporate accounts. This increment has the potential to generate a yearly billing of INR 2 billion ($23 million).