Corporate travel is expected to permanently reduce by 10–20% as companies move to video conferencing for internal meetings, but business development trips will not be scaled back, Dhruv Shringi, CEO and co-founder of Yatra Online, Inc. said during the company’s Q2FY21 earnings call on November 5. “They may not reach pre-COVID levels due to reduction in travel for internal reasons,” he said.
While per-customer travel spend may go down by about 10–20% depending on the nature of the customer, the potentially permanent move from offline to online is a new tailwind, Shringi said. “While per customer spend may decrease, Yatra should be able to make it up with new customer wins,” he said.
Having said that, Shringi expects recovery in corporate travel to lag behind recovery in consumer travel. The company is banking on its “scalable SaaS [software as a service] platform” for corporates in order to improve its market share. It will also add non-related services to its corporate platforms for the corporate travel customer base but Shringi did not specify what those services would be.
COVID-19 accelerates shift to online travel booking, change is here to stay
Since the lockdown in India was lifted in June, Yatra has seen a “meaningful shift” from offline to online. “This has resulted in a domestic air market share rising by approximately 20% from pre-COVID levels in a relatively short period of time,” Shringi said. Some of this buyer behaviour may be permanent, he said.
Corporate travel bookings move online: Only about 10% of all corporate travel bookings are done online and 60% of the market is served by smaller, offline travel agents, Shringi said. However, COVID-19 has accelerated the adoption of online corporate travel bookings, especially as contracts have been coming to an end. In the long term, Shringi expects this trend to continue.
- Yatra’s share of the customer market was also improving but at the expense of offline players, Manish Hemrajani, vice president of corporate development and investor relations, said. This is why the company does not need to spend much on marketing or customer acquisition, he explained.
- Yatra signed a new customer from the retail sector, who will be amongst the company’s top 20 customers, in Q2FY21. The unnamed client had been focussed on digital solutions and banked on the online nature of Yatra’s services to sign the contract, Hemrajani said. “Yatra was able to minimise the disruptions for its customers as the pandemic hit,” he said.
Recovery on international front lagging behind domestic recovery
India has been witnessing a gradual recovery of the travel sector due to re-opening of domestic aviation at the end of may, Shringi said. Domestic aviation traffic increased by 33% month-over-month in October 2020 and reached 42% of October 2019 levels. Capacity is back to between 55–60% of pre-COVID levels, he said.
However, the recovery on the international front has been muted since airlines are operating on “air bubble agreements” between countries. Only 10% of the capacity has come back online and while the number is increasing gradually, it is slower than domestic aviation market. Unlike the domestic market, where Shringi believes capacity could reach 80% of pre-COVID-19 levels by the end of the calendar year, the international market is expected to reach about 30% of its pre-COVID capacity.
“We expect the recovery on the international front to be more gradual since it depends on the signing of international air bubble agreements.” — Dhruv Shringi, co-founder and CEO of Yatra Online, Inc.
Trends in people’s travel habits during COVID-19
- Move towards long drives: Domestic hotel bookings resumed at the end of May and numbers have been increasing since September, Shringi said. “We expect to see gradual recovery here as well in the next quarter as people behind to undertake short haul and driving holidays,” he said. Some of it has already been observed in October which saw people take “short-haul driving breaks” over two long weekends, he said though he did not share specific numbers.
- Booking skewed towards near-term: Hemrajani said that most people are looking at near-term bookings with most of the booking skewed towards the next fortnight. Bookings for summer 2021 are exceptions rather than the norm.
Difficult to predict the duration of long-term impact of pandemic
In its press release and Securities and Exchange Commission (SEC) filing (Yatra is listed on NYSE), the company said that it is difficult to predict the duration of the long-term impact of the pandemic even though travel restrictions and quarantine orders are easing up and travel is gradually increasing both within and outside India. It further warned that containment measures for COVID-19 pandemic will continue to have “significant negative effect” on its business, financial condition, results of operations, cash flows and liquidity position.
However, during the earnings call, Shringi said at least twice that the company had enough liquidity to bounce back to profitability.
The company said it has taken multiple measures to mitigate the negative impact of COVID-19 including:
- Reducing salaries, number of employees: 52.2% YoY decrease in personnel expenses from ₹46.95 crore in Q2FY20 to ₹22.46 crore in Q2FY21. Management salaries were reduced by 50% while salaries were reduced by 25–75% across the company. In Q2FY21, Yatra incurred one-time exit cost of ₹4.25 crore related to severance payouts. It is not clear if these severance payouts are related to the layoff of 400 employees in June or if more employees were laid off in Q2. In June, the company had also furloughed 600 employees.
- Reducing marketing expenses, travel expenses (ironically): Marketing and sales promotion expenses were reduced by 68.2% YoY to ₹1.47 crore from ₹4.62 crore in Q2FY20. The company also reduced other operating expenses by 71.4% to ₹20.4 crore from ₹71.37 crore in Q2FY20. These include travel and conveyance charges, commissions, communication charges, payment gateway charges, rent, and legal and professional charges.
- Automating processes: Automating rescheduling and cancellation of bookings
- Greater flexibility for customers to defer or cancel their travel plans
- Other measures include work from home policies, renegotiating fixed costs such as rent, renegotiating supplier payments and contracts, deferring non-crucial capital expenditures.
Yatra expanded its lawsuit against Ebix in September
Yatra gave a few updates about the lawsuit that it had filed against Ebix in June 2020 after it terminated its then pending merger agreement with the American software company. On August 14, 2020, Ebix had filed a motion to dismiss the complain that Yatra is in the process of responding to. On September 30, 2020, Yatra amended its original complaint to include a fraud claim against Ebix, and expand its claims against “certain banks” of Ebix.
Shringi further said that a large part of the legal costs is linked to the outcome of the case, and that operational planning within the company is not contingent upon a favourable judgement.
- Number of air passengers booked: 464,000, down 77.8% YoY
- Number of standalone hotel room nights booked: 39,000, down 87.7% YoY
- Number of packages passengers travelled: 1,000, down 100% YoY from 25,000 in Q2FY20
- Revenue: ₹26.33 crore, down 85% YoY
- Adjusted revenue: ₹37.77 crore, up 60% QoQ, down 75.4% YoY
- Adjusted revenue from air ticketing: ₹25.32 crore, down 75.4% YoY
- Adjusted revenue from hotels and packages: ₹4.55 crore, down 72.5% YoY
- Total gross bookings (air ticketing, and hotels and packages; total amount paid by customers including taxes, fees and other charges, and is net of cancellation fees and refunds): ₹168.77 crore
- Gross air ticking: ₹157.76 crore, down 91.8% YoY
- Gross hotels and packages: ₹11.01 crore, down 94.4% YoY
- Loss: ₹30.06 crore
- Adjusted EBITDA loss: ₹12.5 crore, down 59.6% from ₹30.94 crore in Q1FY21, down 115.5% YoY