Yatra Reinforces Corporate Travel Segment with Strategic Approach

Internet-based travel enterprise Yatra is gearing up to augment the growth in its corporate travel segment. The focus is planned to shift toward accommodating higher-value, recurrent corporate clienteles as opposed to primarily handling cost-centric recreational travellers. The company’s CEO, Dhruv Shringi, recently disclosed this new strategic approach.

In the fiscal quarter closing June 30, the company showcased an escalating share of gross bookings owing to its B2B sector. It was shared by Shringi that nearly two-thirds of the gross reservations originated from the B2B segment. It’s projected that by the fiscal year’s culmination, this share might approach 70%.

In pursuit of increasing the usage of Yatra’s platform amongst businesses, Shringi is aiming to create what he termed as ‘switching costs’, a scenario where businesses would find it challenging to transition elsewhere once they have fully integrated with Yatra’s platform. He stated that rivals predominantly operate with companies using older, offline methods, placing Yatra at an advantageous position.

The Indian company prides itself in achieving deeper technological incorporation with consumers and a broader online foothold. Yatra firmly believes this offers a competitive advantage as companies digitize their travel-related operations. Given many competitors still cling to an offline operating model and unequipped for comprehensive integration, Yatra identifies an extensive opportunity to infiltrate the digital upshift encompassing the industry.

The company underlined its strategic expansion in the previous year with the acquisition of corporate travel service provider Globe All India Services, popularly known as Globe Travels, at a deal set at INR 1.28 billion (approximately $15.25 million). The acquisition further testifies to Yatra’s commitment to enriching its corporate audience base.

Yatra views their longstanding corporate customers as an integral part of their overall strategy. Shringi cited the duration of affiliation with sizeable clients as an indication of Yatra’s ability to retain customers. He emphasized on the significant number, about 73%, of their top clients who have been in business with Yatra for over half a decade.

In the company’s standpoint, these continued partnerships secure predictable revenue streams and create operational leverage after technical integrations have been executed. In an era where online travel platforms have aggressively pursued consumers with a barrage of discounts and promotional activities, Yatra deviated from the norm.

Shringi stated, ‘Our annual retention rate (for corporate travel) exceeds 97%.’ The high retention rates contribute to the impressive operating leverage experienced by the company which directly relates to the significant improvements in profit margins.

Primarily, Yatra has curtailed direct discounts provided to customers. Instead of substantial price reductions, the company opted to rely on a promotional model involving banks and marketing collaborators. As a consequence, the cost of acquiring customers for Yatra was significantly decreased.

Secondly, Yatra pivoted towards higher-margin offerings like corporate airfares, hotel bookings and travel packages. Shringi noted that hotels and package deal bookings have about an 11% net margin, contrasted to a 3%-4% net margin for air travel tickets.

Shift in business strategy and increase in higher-margin services footprints positively impacted Yatra’s net margin measures, providing better revenue after cost calculations than the bare growth in gross reservations. The company reported an approximately 9% year-over-year growth in gross bookings in the latest quarter, a reversal trend after maintaining a slow pace in the recent past.

Despite the partial recovery, the company experienced only a slight improvement in air ticketing while faster growth was registered in hotel reservations and travel packages. The company, therefore, intends to leverage the selling of hotels to corporate customers as an immediate strategy to propel growth.

For Yatra, categories like hotels and packages are easier to cross-sell and offer better profit margins. Concurrently, operation revenue rose by a substantial 108% year-over-year to INR 2.1 billion ($24 million) in Q1. The company’s net profit increased by a whopping 296% compared to the same period in the previous year to INR 160 million ($1.8 million), while 34 new corporate accounts were added to the company’s roster during the quarter, promising a potential annual billing of INR 2 billion ($23 million).