Yatra Pivots Business Strategy Towards Corporate Travel
Yatra, an Indian-based online travel company, has devised a plan to escalate its corporate travel operation. Dhruv Shringi, the CEO and Whole Time Director, has indicated that the company’s strategic direction will be attuned more towards attracting and retaining corporate clientele who provide a constant stream of business, compared to sporadic leisure travellers whose bookings are primarily price-driven.
Analysts have observed a robust increase in Yatra’s B2B bookings for the quarter ending June 30. According to Shringi, approximately 67% of gross bookings are now originating from the B2B segment and he foresees this number potentially increasing to around 70% by the fiscal year-end. It is evident that Yatra is striving to ingrain its platform in the daily routines of corporate clients.
Incorporation of Yatra’s platform into routines results in what Shringi labels as ‘switching costs’. Simply put, once a company is heavily reliant on Yatra for its travel bookings, moving to another platform would incur additional costs in terms of time and resources. As Shringi points out, this endorses Yatra’s unique approach in a landscape where most competitors are still relying on traditional offline methods.
Yatra’s potential edge in the market is deeply tied with its technology integration capabilities. The company claims to have a profound level of technical integration with its customers, which leads to superior online penetration. They argue that this factor is critical as companies shift progressively towards digitizing their travel arrangements.
Shringi believes that there is a colossal opportunity for Yatra to seize the moment as the travel industry witnesses an influx in digital adoption. He pointed out that Yatra stands out as most of their competitors are yet to fully embrace the digital era, servicing customers in a rather antiquated fashion with minimal integration.
In 2021, Yatra announced the acquisition of corporate travel services provider, Globe All India Services (Globe Travels), for roughly $15.25 million. This strategic decision underscores the company’s intent to pivot towards the corporate travel space, emphasising the value of its long-term corporate customers to Yatra’s overall business strategy.
Shringi proceeded to highlight the strength of their customer relationships, stating that out of their top 100 customers, 73 have been loyal to the company over the past five years. The company is confident that these enduring relationships are an indicator of predictable revenue streams and operational leverage, which will be realized once the technical integration is implemented.
A change in Yatra’s strategy was marked when they decided to focus less on consumer-centric discounts and marketing ploys, instead steering towards providing a premium service to corporate clients. One of the key metrics supporting this shift was cited by Shringi: an impressive annual retention rate for corporate travel above 97%. This paradigm shift, according to Shringi, contributes significantly to improved operating leverage for the business.
Speaking on operational improvements, Shringi pointed towards two variables contributing to superior margins. Firstly, Yatra engineered a shift from direct heavy discounts towards more favourable deals through banking and marketing partnerships, an approach that substantially lowered Yatra’s customer acquisition costs. Secondly, Yatra implemented a strategic business mix towards higher margin offerings, such as corporate airfares, hotels, and packages.
Highlighting the shift towards higher margin products, Shringi said, ‘Our hotel and package offerings have net margins closer to 11%, compared to air’s net margin of around 3%-4%. We’ve seen our mix of hotels and packages grow from about 15% to around 20% of gross bookings year on year.’ This re-alignment emphasizes Yatra’s commitment to pushing net margins and increasing revenues, surpassing raw gross booking growth.
The journey towards recovery has been noted with a year-over-year rise in gross bookings by approximately 9% for the most recent quarter, overturning former volume reductions. Although air ticketing experienced a modest recovery, the hotel and package segments witnessed a swifter growth trajectory. This encouraged Yatra to focus on upselling hotel services to its established corporate customers as an immediate growth strategy.
Some recent corporate accounts were won as ‘hotel-led,’ which implies customers primarily engaged with Yatra for their hotel bookings. This turns out to be a gateway to enlarging the footprint of Yatra’s broader travel service offerings. By concentrating on hotels and packages, the company is aiming to push higher-margin and more easily cross-sellable products in the travel industry.
Fast-tracking to the financial highlights, Yatra’s quarterly performance demonstrated key growth metrics: a 108% year-on-year increase in operating revenue, reaching INR 2.1 billion ($24 million). The adjusted EBITDA also experienced a surge of 138% year-on-year to INR 249 million ($2.8 million), with net profit skyrocketing to an increase of 296% compared to the same period last year to INR 160 million ($1.8 million).
During this fiscal quarter, Yatra continued to expand its corporate portfolio with the closure of 34 new corporate accounts. These newly cemented partnerships represent a potential annual billing worth around INR 2 billion ($23 million). The figures underline Yatra’s strategic mission to continuously broaden its corporate client base and leverage its high-margin product offerings.