India’s Travel Market Sees Slow Growth Amid Changing Booking Trends
In 2025, India’s travel market grew by just 1%, totaling $41.7 billion. This represents a significant decline from the 10% growth seen in 2024, as detailed in Phocuswright’s report, India Travel Market Essentials 2026.
A deeper look at the numbers reveals a notable shift in how Indian travelers are booking their trips. Online bookings rose by 4%, reaching $24 billion, while offline bookings dropped by 2% to $17.8 billion, pushing online booking’s share up to 57%.
The airline sector faced challenges, particularly with disruptions from major carriers like IndiGo and Air India, making it the lowest-performing segment. In contrast, car rentals emerged as the fastest-growing option, as many travelers preferred to hit the road given the current uncertainties.
Looking ahead, Phocuswright predicts a strong recovery for the travel market in 2026, expecting a growth of 13%, bringing the total to $47.2 billion. This growth will partly come from higher airfares while strong domestic travel is expected to benefit hotels and car rentals. After that, growth is projected to slow to about 7% in 2027 and stabilize around 8% annually, potentially reaching $59.1 billion by 2029, with online booking penetration climbing to 62%.
Airlines Struggle with Rising Costs
India’s airline industry is now grappling with significant fuel costs. In response, airlines have implemented fuel surcharges and raised ticket prices, but many Indian travelers are sensitive to price changes, limiting how much of these costs can be passed on. For shorter domestic routes, travelers continue to explore options like trains and cars.
To support the airline sector, the government has committed approximately $1.04 billion (₹100 billion) towards stabilizing aviation fuel prices. However, increased costs, longer flight paths, and currency pressures are reshaping the international travel landscape.
Air India has cut back on some international routes and IndiGo is planning to conclude its widebody lease program this October. Following profits in the previous two fiscal years, IndiGo now faces a substantial net loss of around $249 million (₹23.94 billion) in FY26, despite seeing higher passenger revenue.
For the airline sector, Phocuswright anticipates a growth rate of 16% in 2026, partly due to rising fares, with a forecast of slower growth in subsequent years and a renewed increase anticipated in 2028 and 2029.
Online Travel Agencies Expand Services
India’s online travel agencies (OTAs) are broadening their focus beyond just booking flights or hotels. MakeMyTrip recently took a majority stake in Flamingo Transworld, known for group tours, while ixigo expanded its services to include short hotel stays through its Brevistay deal. Cleartrip has also ventured into rail bookings, adding to its existing flight, hotel, and bus options. EaseMyTrip’s new strategy, known as EMT 2.0, focuses on hospitality, vacations, and transportation.
In a contrasting strategy, established suppliers like Air India are offering hotel bookings through platforms like Booking.com. IndiGo is also linking its loyalty program with Accor hotels and the Indian Railway Catering and Tourism Corporation is now packaging international trips.
This shift in strategy is leading to a more competitive environment focused on customer relationships rather than individual travel services.
AI Revolutionizes Travel Planning
Artificial intelligence is becoming a key player in the travel sector as Indian startups like 30 Sundays and The Tarzan Way utilize AI for crafting itineraries and managing complete trips. Established companies are also adapting; for instance, MakeMyTrip has launched Myra 2.0, which offers an intuitive interface for searching, comparing, booking, and payment. Similarly, ixigo’s TARA and Air India’s AI.g assist in planning and booking trips.
Additionally, RateGain is enhancing its AI applications across hotel marketing and revenue management, following its acquisition of Sojern.
Phocuswright emphasizes that the upcoming competition within India’s travel industry will center around managing the entire transaction process—from a traveler’s initial interest to booking and overall trip management.
