Yatra to increase footprint in corporate travel segment

With online and offline companies aggressively playing the discount game, Yatra.com is exploring ways in which it can chart a different growth path and create a wider niche for the brand in the country’s booming travel business. It has a new campaign with brand ambassador Ranbir Kapoor, launched earlier this year that pitches the brand as a one-stop solution for all travellers. And it has recently acquired a firm, Air Travel Bureau, to help shore up its corporate travel business. As Yatra gets more vocal about the brand and its promise for business travellers, the question really is whether it can create customer stickiness and loyalty in a highly commoditised marketplace. 

While Yatra and MakeMyTrip started out around the same time, the latter has taken the lead in terms of visibility, marketing and discounted deals for travellers. Yatra is looking to counter that.

The Indian travel business is booming but the market moves on hotel deals and cheap fares. This makes customer acquisition a hugely expensive experience for companies, say experts. According to Global Business Travel Association, India is the tenth largest business travel market, valued at close to $30 billion in 2015 and is also expected to be the fastest growing market, clocking 12 per cent growth rates till 2020, higher than the 9 per cent reported between 2011 and 2015.

It is this opportunity that Yatra wants to tap into. It unveiled a new brand identity earlier this year with a new red logo. But beyond the image makeover, it has been working to shore up the business travel segment. Last week it announced the acquisition of Delhi-based Air Travel Bureau (ATB) for anywhere between $22.5-27.5 million (Rs 140-175 crore).

What does ATB bring to the table? The corporate travel segment is an area that the company has been keen to establish its dominion over. ATB helps do that as it had gross bookings of around Rs 1,500 crore in FY17. Yatra claims that the post the acquisition it will be the largest corporate travel service platform in the country in terms of gross bookings. “We believe that this acquisition provides us with a unique opportunity to grow our business in India without compromising on margins in the medium term,” Yatra’s co-founder and CEO Dhruv Shringi said in a conference call.

Given the high cash burn in retail segment, Yatra had decided to diversify its customer base four years ago. It acquired travel firm TSI in 2010 to build a B2B segment and now caters to over 15,000 agents across the country. It bought online hotels aggregator travelguru in 2012. The ATB acquisition is the most recent. 

While it competes aggressively with MakeMyTrip, the largest firm in online travel space, for the air ticket and hotel bookings in B2C segment, Yatra believes it can get an edge as a corporate and B2B business travel company. “Given the heightened competitive intensity and MakeMyTrip’s dominant position in the B2C segment, other companies are looking to diversify their business. For the last two years Cleartrip is promoting activities and experiences along with selling air tickets and hotel rooms. Yatra is expanding its corporate business,” said Chetan Kapoor, research analyst at travel research firm Phocuswright.

The corporate travel segment offers steady and consistent business volume and has lower marketing and customer acquisition costs. Building Rs 1,500 crore worth of business in the B2C segment would have required far higher investment and that explains Yatra’s interest in acquiring ATB, said an industry analyst. 

“The combined entity of Yatra and ATB will have the potential to access a captive consumer base of 4.6 million people who are employed in the over 650 large and medium scale enterprises. In addition, we believe that there is an opportunity to cross sell Yatra’s hotel inventory to the 400-plus existing customers of ATB and the opportunity to implement Yatra’s self-booking corporate travel platform and mobile app across ATB’s customer base,” Shringi had said post the acquisition.

Online travel agencies have traditionally acquired new customers through deep discounts and marketing offers. But such steep discounting has made the overall business unprofitable and all the online travel companies have notched up losses. Yatra posted an adjusted EBIDTA loss of Rs 100 crore in FY 2017. 

According to industry sources, Yatra earns around 15 per cent of its revenue from corporate travel segment and a fairly large share comes from hotel bookings within the segment. It has scope to further grow its business as more companies switch to technology enabled platforms for travel planning. Carlson Wagonlit, American Express, Thomas Cook +SOTC, FCM and BCD are among the leading companies in corporate travel space and are estimated to have air ticket bookings of around $200-300 million each (between Rs 1,200-Rs 2,000 crore), according to industry sources. Yatra did not share how much it earns from corporate travel segment. 

With the new companies in the fold, Yatra is expecting to bump up its presence in business travel, but that can come only if the company is able to leverage its increased clout in the segment with technology-based innovations say analysts. At the same time, many believe that the business of business travel could perhaps give it a greater hold on the overall travel business too. “We expect it to maintain its market share in the B2C space but we expect them to use the profit from these segments to grow overall operations,” said Kapoor from PhocusWright.

THE ACQUISITIONS JOURNEY
·         2010 
Company: Travel Services International (TSI) 
Business: B2B platform for travel agents
·         2012 
Company: Travelguru.com
Business: Online hotels aggregator
·         2017 
Company: Air Travel Bureau
Business: Corporate travel