Yatra's focus is on building hotels & holidays business

Currently, Yatra is hugely dependent on its air business with nearly 65% revenue coming from ticketing business

Over a year ago, Yatra (Hindi for journey) hired film star Salman Khan to reach out to the masses in selling air tickets, hotels and holidays. Perhaps it was the the only online travel company to get a Bollywood celebrity endorsement and certainly the first to give its brand ambassador an equity stake in the company. A corner of Yatra.com’s landing page has Khan’s speech bubble: “Har yatra se pehle Yatra.com” (Yatra.com before every journey).

Besides regular spends, the two most expensive items Yatra perhaps bought were Khan and TravelGuru. The latter acquisition for an undisclosed amount leapfrogged Yatra’s total hotel room inventory to 12,000 right ahead of its closest competitor MakeMyTrip. Online travel companies are moving their business models to get a better part of their revenues from hotels and holidays, which offer a margin of 15-20 per cent, compared with margins of two-three per cent in selling air tickets.

Currently, Yatra is hugely dependent on its air business with nearly 65 per cent of its revenue coming from the ticketing business and the remaining from holidays, hotels and advertising (on its website).

While the revenue of the company has been rising between 15 and 20 per cent, so have its losses. For 2010-11, the company’s losses increased to Rs 39 crore from Rs 8.2 crore during the previous year. The website sees around 4,000 transactions a day.

Clearly, Yatra’s focus is on building its hotels and holidays business, even if it means incurring losses in the short term. “It’s not like we are sacrificing profit,” says Dhruv Shringi, managing director, Yatra.com. He believes this is a necessary investment that will improve the financial health of the company in the long run.

Its current investors include Intel Capital, Reliance Capital, Network18 and Valiant Partners. Most of them did not wish to comment on their investments in the company. However, a senior executive of a travel firm, who did not want to be identified, says investors have stuck around, hoping Yatra will eventually go for an initial public offering (IPO) and thereby give them a safe exit. The travel company, however, has no plans of raising fresh capital. “We are adequately capitalised. We are focusing on growing the business, breaking the clutter,” Shringi says.

After talking about an IPO for seven years, Yatra perhaps wants to keep things low key. It has added people in the top management level in the past few years. “It’s trying to build up its investor confidence index, come in the green and look at the environment good enough for it to go public one day,” says the executive.

A quick comparison with its peers and Yatra is still wanting in many areas. Technology is one area the company is struggling to get its grip on. It is yet to make its mark on mobile, the third screen, industry experts say. Companies like MakeMytrip and Cleartrip have launched a variety of apps in this area. International travel markets have been abuzz with news of apps acquisitions in digital space. “We are keeping our eyes and ears open but there is no concrete acquisition plan on the anvil,” says Shringi. He adds mobile technology is one of the big challenges and an equally big opportunity for an online travel player like Yatra and will be closely evaluated by the company.

Besides, Yatra is still to figure out its strategy in offering a complete bouquet of services, including buses, taxis for a seamless connectivity and end-to-end solutions. It is not as if the company hasn’t addressed these issues internally. It is expected that by the end of this month, Yatra, too, will provide bus bookings.

“Travel companies have to provide services like multi-modal transport, other ancillary services to bring down the cost per customer. Very few have managed to successfully do that,” said Milan Sheth, partner, e-commerce, EY.