Home / Companies / News /  Yatra sets sights on non-aviation businesses

Bangalore: Travel website Yatra Online Pvt. Ltd is revamping its mobile phone product, offering new services such as bus and hotel bookings as it seeks to boost non-airline sales to about half of its business.

Yatra, Makemytrip.com and other online travel sites, which get more than half their business from flight tickets, have increased hotel bookings over the past 18 months as rising fares have hurt demand for air travel.

The focus on diversifying away from flight tickets increased after Kingfisher Airlines Ltd was grounded last year.

Within 18 months, Yatra expects to get about 50% of its business from the non-airline segments, compared with less than 35% currently, president Sharat Dhall said in an interview.

The company, the investors of which include the TV18 Group, Norwest Venture Partners, Intel Capital and Reliance Venture Asset Management Ltd, will offer bookings for bus tickets and car rentals before the end of the year, he said.

“With Kingfisher out, it took almost 20% of the capacity out of the market. That led to prices rising and demand collapsing. The remaining airlines cut back on their commissions. That got us to focus more on the other parts of the business and aggressively grow the hotels and holiday packages parts," Dhall said.

Yatra, which acquired hotel booking website Travelguru last year, and Makemytrip.com have moved away faster from the airline business than rivals such as Cleartrip.com. Yatra already generates 20% of its sales from holiday packages.

Hotels and holiday packages typically offer higher margins to websites than airlines. Makemytrip, which is listed in the US, got a margin of 12% on hotel and holiday package sales, according to the company’s latest annual report. Margins on air tickets were just 6%.

“Airline commissions are just not enough these days, so for any of these travel portals to keep themselves alive they need to be able to offer other services. And one area which offers attractive commissions is hospitality space," said P.R. Srinivas, senior adviser, Crowe Horwath HTL Consultants.

“And you can add much more value to the consumer in the hospitality space which has thousands of hotels and places than in airlines, where there are very few options," he said.

Yatra, which offers bookings in 12,000 hotels across India, plans to add another 8,000 by the end of the year and is moving its marketing spending towards promoting its hotel bookings business, Dhall said. The firm will also launch hotel bookings on its mobile platform, where it has lagged behind rivals.

“We currently don’t have a full-fledged hotels offering on the mobile. That’ll be out with the revamped product. We’re seeing about 8% of our bookings coming from mobile and clearly the traveller has taken to mobile quite aggressively," Dhall said.

He declined to comment on when the company would raise funds but said its push into hotels will require money.

“Right now we’re OK on the funding side but our hotels business will require investment for the next two years at least; so at some point we will look at raising money," Dhall said. “If the market is growing three-four times, it’s not the time to make profits, it’s about gaining share. The company which wins the hotel piece will end up being most profitable and most valuable."

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