Yatra Shifts Focus: Bets Big on Corporate Travel Sector

Yatra, a prominent Indian digital travel agency, is looking to expand its corporate travel sector. Dhruv Shringi, the CEO and Whole Time Director, spoke of a targeted focus on premium, recurring business customers as opposed to pursuing traffic driven by price-sensitive leisure customers. The expansion of the corporate travel sector is seen as a strategic move for Yatra’s business model.

Yatra revealed its increasing emphasis on corporate travel in its most recent quarterly report, showing a significant portion of gross bookings deriving from their B2B relationships. According to Shringi, about 67% of the company’s gross bookings were derived from the B2B sector, and this percentage could ascend towards 70% by the fiscal year’s end.

The company is actively striving to integrate its platform into the daily routines of its corporate customers. The main idea, as C.E.O. Shringi refers to it, is to create a ‘switching cost’ scenario. This essentially implies that once a company integrates Yatra into their system, it would require significant effort to switch to a different provider.

Notably, Yatra claims that it is ahead in the digitization curve compared to most competitors who still rely on traditional methods to cater to companies. The online travel agency boasts a robust technical integration with its customers and a further-reaching online penetration. This is perceived as a strategic advantage in the digital transition wave currently propelling the corporate travel industry.

Shringi highlighted the lack of digital integration among their competitors, identifying a lucrative opportunity in the market. Yatra aims to capitalize on this by facilitating and promoting a much more digital-focused approach. This could allow them to command a substantial presence as corporations transition into digitally streamlined travel processes.

Yatra has significantly invested in its corporate travel facet, as demonstrated by its acquisition of Globe All India Services, a provider of corporate travel services. This acquisition, which was announced last year, came at a price of INR 1.28 billion ($15.25 million) in cash.

The longstanding relationships Yatra has fostered with its corporate clients have shaped their strategic direction. Shringi emphasized the importance of such durable partnerships, stating that 73 out of their top 100 clients have been with them for more than five years. According to Yatra, this longevity highlights their stronghold in the industry while ensuring more predictable revenue streams.

Yatra has been successful in retaining its corporate clients, as evidenced by an impressive annual retention rate exceeding 97%. This strategy contrasts the typical trend among other online platforms that heavily rely on discount incentives to attract and retain customers. The firm believes their unique approach has afforded them a large operating leverage within their business portfolio.

Strategic decisions have contributed to Yatra’s improving profit margins. Firstly, the company has reduced its direct discount offerings to customers, instead relying heavily on promotional campaigns involving banks and marketing partners. This maneuver substantially reduced the cost of customer acquisition for Yatra.

Secondly, Yatra’s product range witnessed a shift towards higher-margin products such as corporate airline tickets, hotels, and vacation packages. Shringi explained that the net profit margin from hotels and packages was about 11%, while airline tickets offered a net margin of 3% to 4%. This change in product focus increased the company’s net margin and revenue-after-cost, outpacing the mere growth in gross bookings.

There was a modest annual increase in gross bookings, by approximately 9%. Though the growth was unevenly distributed where air-docketing showed slight improvements, the hotel, and package sector demonstrated a much faster growth rate. To drive continued growth, Yatra is keen on pushing hotel sales as a main revenue propeller to its corporate clients.

The concept of ‘Hotel-led’ sales was also introduced where customers would first use Yatra’s platform for hotel bookings and later find themselves availing of Yatra’s wider travel services. According to Yatra, Hotels and vacation packages offer higher profit margins and are easier products to cross-sell.

Some key Q1 figures from Yatra included a 108% YoY increase in revenue from operations to INR 2.1 billion ($24 million). Adjusted EBITDA saw a significant surge of 138% YoY to INR 249 million ($2.8 million) while net profit swelled by a substantive 296% compared to same quarter in the previous year, resulting in INR 160 million ($1.8 million).

Yatra continued to grow its list of corporate clients in the recent quarter, securing an impressive 34 new corporate accounts. This new business signifies a potential annual billing of approximately INR 2 billion ($23 million), affirming the company’s continuous expansion within the corporate travel sector.