Yatra’s High-flying Strategy: Prioritizing Corporate Clients

India’s leading online journey platform, Yatra, has set its sights on expanding its corporate travel segment. CEO and Director, Dhruv Shringi, revealed that the company’s growth strategy will primarily concentrate on corporate clients who offer higher value and frequent transactions, as opposed to the volatile nature of price-sensitive leisure customers. This prioritization of corporate clients has manifested in the company’s gross bookings in the quarter ending June 30, with a significant portion coming from its B2B arm.

The data suggest that approximately 67% of the company’s gross bookings now originate from B2B transactions. Shringi predicts that this figure could rise closer to 70% by the time the financial year concludes. Yatra’s strategic objective is to make the platform an indispensable part of corporate clients’ usual operations, creating a cost of change or ‘switching costs’ that discourages clients from diverting to an alternate platform once they’re reliant on Yatra.

Shringi indicates that Yatra’s competitive landscape still largely operates in the traditional offline sphere with limited levels of technological integration. It’s in this respect Yatra sees one of its key differentiators, displaying pride in the depth of technological integration it achieves with its clients and its superior online penetration. Yatra identifies a major advantage in this setting as companies progressively evolve their travel operations into the digital domain.

Shringi states their competitors are typically still providing customers with services off the grid, and only incorporate a minimal level of technological integration. As a result, Yatra perceives a significant opportunity to seize the digital adoption currently undertaken within the industry. The company’s acquisition of Globe All India Services (Globe Travels), a corporate travel services provider, was announced in the previous year for INR 1.28 billion ($15.25 million) in cash, bolstering this strategic aim.

Long-established corporate clients constitute a central pillar in Yatra’s strategic plan. According to Shringi, confirmation of Yatra’s appeal to these corporate clients rests in their longevity with the company. He stated, ‘Regarding our top 100 clients, 73% have been in partnership with us for over five years.’

Yatra perceives these enduring relationships as the key to predictable revenue streams and operational leverage, once the technological integrations have been realized. While many online travel platforms have been engaged in a race to the bottom through discounting and heavy marketing towards consumers, Yatra has opted to play a different game.

Yatra has reported a staggering annual customer retention rate of upwards of 97% within the corporate travel segment. Shringi adds, ‘This is what translates into such elevated operational leverage within our business.’ It points to two pivotal drivers contributing to margins: the downsizing of direct discounting and a shift in business mix toward higher-margin products.

Yatra has decided to rein in direct discounting and instead shift its focus to delivering promotional offers via banks and marketing partners. This strategic shift has a twofold benefit: it sustains customer interest, while reducing the costs associated with acquiring new customers. Moreover, the firm has maneuvered its business mix towards high-margin sectors like corporate airfares, accommodation, and package deals.

Shringi explains that ‘Hotels and package offerings yield net margins closer to 11%, in stark contrast to air, which goes in around 3-4%.’ He advises that there’s a continued trend in the change of the mix of bookings, with a rise in accommodation and packages from about 15% to about 20% of gross bookings over the year.

Thanks to these strategic adjustments, Yatra has seen a healthier net margin accompanied by enhancements in revenue post costs. Even outpacing the underlying growth in gross bookings. The performance figures for the quarter showed an approximate 9% increase in gross bookings compared to the same period of the previous year, which reverses the prior overall volume decline.

However, the recovery was not uniform across all business sectors. While the air ticketing segment registered a modest gain, the hotels and packages segment exhibited more robust growth. Recognizing the higher margins and easier cross-selling opportunities, the company is strategically depending on selling more hotel accommodations to its corporate clients.

Yatra has identified a timely growth lever in marketing hotels to its corporate customers. Recent corporate acquisitions have been led by hotel bookings, indicating that businesses initially turn to Yatra for their accommodation needs, which then paves the way for more comprehensive travel service offerings. Meanwhile, hotel accommodations and packages continue to deliver the easiest cross-selling opportunities for the company as well as higher profit margins.

For the quarter, the operational Revenue figures were impressive, marking an increase of 108% year-on-year, amounting to INR 2.1 billion ($24 million) in just the first quarter. Adjusted EBITDA too has shown great promise, skyrocketing by 138% year-on-year to achieve INR 249 million ($2.8 million).

Record breaking net profit was also observed, registering a noteworthy 296% increase against the same period of the previous year, totaling to INR 160 million ($1.8 million). While delivering these exceptional financial figures, Yatra also succeeded in widening its corporate client portfolio.

Through the latest quarter, Yatra added an impressive 34 new corporate accounts, bringing the potential for a surge in annual billings of approximately INR 2 billion ($23 million). This significant influx of corporate accounts is a testament to the firm’s vision of focusing on corporate clients and not on discount-driven consumer traffic.