Yatra Prioritizes Corporate Travel, Aims for Business Dominance

Yatra, a leading Indian online travel firm, is set to enlarge its corporate travel sector. CEO and Whole Time Director, Dhruv Shringi, pointed out that the company’s main aim will be to prioritize high-value, recurrent corporate clients than leisure customers who are driven by price points. Its business-to-business (B2B) segment had a robust share in its total gross bookings for the quarterly period ending on June 30th. Interestingly, 67% of gross bookings were contributed by B2B, with Shringi indicating a potential increase to approximately 70% by the fiscal year-end.

Yatra is committed to making its platform a seamless element of its corporate clients’ day-to-day operations. This integration introduced the concept of ‘switching costs’, representing the additional effort a company would need to disassociate once they’ve merged with Yatra’s system. Shringi highlighted that the majority of competing businesses still resort to offline methods to serve companies.

Yatra declares a superior technical integration with customers and a higher extent of online penetration. The company claims that this attributes to its competitive advantage as companies shift towards digitizing their travel procedures. According to Shringi, the company’s competitors still rely on offline customer service with minimal integration, presenting a golden opportunity for Yatra to lead in the digital adoption currently widespread in the industry.

Previously, Yatra made noteworthy headlines with its purchase of Globe All India Services (also known as Globe Travels), a provider of corporate travel services, for a sum of INR 1.28 billion ($15.25 million), paid in cash. Shringi holds long-standing corporate customers at the heart of Yatra’s strategy. This is reinforced by the average time span of prominent client relations demonstrating the strong bond the company establishes.

Shringi illustrated that out of their top 100 customers, 73 have maintained a relationship with the company for more than five years. Yatra believes these longstanding relations ensure a constant flow of revenue and operational leverage once technical integrations are completed. Yatra managed to differentiate itself when online travel platforms were battling to win customers with hefty discounts and aggressive marketing.

The company reported an annual retention rate surpassing 97% for corporate travel, bolstering its operational leverage. Shringi identified two principal factors responsible for improvements in profit margins. Firstly, Yatra minimized direct discounting for customers, shifting towards utilizing offers through bank tie-ups and marketing collaborations, thereby reducing customer acquisition costs.

Secondly, the business focus transitioned to higher-margin offerings such as corporate air travel, hotel bookings, and package deals. Shringi explained that, ‘Hotels and packages have net margins closer to 11% compared to the 3%-4% net margin for air travel’. There has been a significant shift in the distribution of hotel and package bookings, which increased from about 15% to 20% of total bookings within a year.

These strategic changes contributed towards the escalation in the company’s net margin and measures of revenue-after-costs, surpassing the growth in gross bookings. Despite facing previous dips in volume, Yatra witnessed an approximate 9% year-to-year increase in gross bookings during the last quarter. It was observed that the recovery varied across areas, where air ticketing saw a modest improvement, the growth was more significant in hotels and package booking sector.

With their focus firmly on the corporate client, Yatra is keen to take advantage of cross-selling opportunities, particularly within the hotel booking sector. It was noted that a number of recent corporate contract wins were initiated by hotel bookings. This then branched out to a wider variety of travel services offered by Yatra. Currently, hotels and packages offer Yatra high margin and present greater cross-selling opportunities.

In terms of financial metrics during the last quarter: The revenue gained from operations witnessed a 108% year-on-year surge, landing at INR 2.1 billion ($24 million). The company’s Adjusted EBITDA soared by 138% year-on-year, reaching INR 249 million ($2.8 million). The net profit rose by an impressive 296% compared to the corresponding time span last year, amounting to INR 160 million ($1.8 million).

Additionally, Yatra continued to broaden its corporate clientele. During the last quarter alone, the company successfully acquired 34 new corporate accounts. These new additions have the potential to bring in annual billing of approximately INR 2 billion ($23 million).