Overview of India’s Travel Market
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Growth Trends: India’s travel market grew by just 1% to $41.7 billion in 2025, a slowdown from 10% in 2024, as detailed in Phocuswright’s India Travel Market Essentials 2026.
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Booking Shifts:
- Online bookings increased by 4% to $24 billion.
- Offline bookings saw a 2% decline to $17.8 billion.
- Online penetration is now at 57%.
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Segment Performance:
- Air Travel: The weakest segment due to operational disruptions with airlines like IndiGo and Air India.
- Car Rentals: The fastest-growing segment, encouraged by travelers opting for road trips.
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Future Forecasts:
- Phocuswright anticipates a rebound in 2026 with 13% growth to $47.2 billion, supported by higher airfares and resilient domestic travel.
- Growth is predicted to slow to 7% in 2027, stabilizing around 8% annually, reaching $59.1 billion by 2029, with online penetration projected to rise to 62%.
Challenges for Airlines
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The airline sector faces challenges from rising fuel costs, leading to increased fuel surcharges and fares.
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Price Sensitivity: The Indian market’s price sensitivity limits how much of these costs can be passed on to consumers.
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Alternatives such as rail and road travel remain viable for shorter routes.
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Government Support: The Indian government has committed approximately $1.04 billion in price stabilization support for aviation fuel.
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Airline Adjustments:
- Air India and IndiGo are adjusting their operations, with IndiGo reporting a $249 million (₹23.94 billion) net loss in FY26, facing challenges despite increased passenger revenue.
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Future Growth: Phocuswright projects a 16% growth for the airline sector in 2026, primarily driven by higher fares.
Expanding Online Travel Agencies (OTAs)
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Diversification: Indian OTAs are broadening their offerings to encompass the entire travel journey.
- MakeMyTrip acquired a majority stake in Flamingo Transworld for group tours.
- Cleartrip expanded into rail bookings.
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Supplier Innovations: Companies like Air India and IndiGo are also moving into new domains, including hotel sales and vacation packages, showcasing a competitive field where travel agencies are striving to deepen customer relationships.
The Rise of AI in Travel
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AI Adoption: Startups are integrating AI for itinerary planning, experiences, and trip management.
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Established Players Adapting: Companies like MakeMyTrip and Ixigo are developing AI-driven tools for search, booking, and customer service.
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Focus on Complete Transactions: The industry is moving towards offering complete transactional experiences from initial requests through to trip management.
Conclusion
The Indian travel market is undergoing significant transformation, driven by a shift to online bookings, challenges in air travel, and an increasing role of technology, particularly AI, in enhancing customer experiences. The landscape is competitive, with both OTAs and suppliers expanding their offerings in response to changing traveler preferences.
