India’s travel sector is growing alongside its rapidly expanding economy.
The travel sector accounted for upwards of $221 billion of India's gross domestic product in 2023, marking a near 10% jump from 2019, according to the World Travel and Tourism Council. The WTTC said it anticipates that contribution to grow to nearly $500 billion in 2034, with proper government support.
Some experts believe its trajectory looks similar to China’s path a dozen or so years ago — when a number of brands including Trip.com and Fliggy, grew into industry leaders.
“If you look at the evolution of the Indian market in terms of where we are in GDP per capita or where we are in terms of online travel penetration [or] where we are in terms of discretionary spend — a lot of that starts to mirror where China was roughly, I would say about 12,14, years ago,” said Aloke Bajpai, managing director and group CEO of Ixigo, an online travel platform in India that had its initial public offering last year.
With figures demonstrating India’s progress, the country is surely on the verge of a travel boom, with continued momentum expected according to a the latest forecast from Phocuswright.
While income per capita is relatively low since about half of India's population is under 25, Phocuswright research manager Coney Dongre said people still want to travel.
“The Indian travel industry is set for robust growth in the coming five years,” Dongre said. “The online travel market is expected to outstrip overall industry growth, significantly expanding the market by introducing diverse travel options to individuals who previously had limited access.”
As the nation's purchasing power grows, travel is becoming an “essential aspect,” when it comes to lifestyle, she said and predicted travel players across all segments would benefit.
India’s trajectory vs. China’s
With India’s economy expected to continue to grow, Bajpai said domestic and international travel spend could start to grow disproportionately faster.
He said that today the overall travel market is growing at about 9% while online travel markets (including direct online and B2B2C online) are growing at 12% or 13%, while the B2C online travel agency market is growing at a rate closer to 18% year over year. And Bajpai believes the growth could accelerate given the GDP and online penetration growth, which is what happened in China, he said.
There, companies started to grow rapidly and over a decade or so those companies became “giants,” he said.
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Bajpai expects to see some growth like that for a select few companies in India as well.
“We're still growing way faster than the overall online travel market, for a certain reason, right?” he said about Ixigo. “Because we are sort of solving problems that Indian travelers face.”
Dongre said she’s heard the India versus China comparison in a number of different contexts.
“If India mirrors China's trajectory, we can expect millions of new travelers venturing into both domestic and international destinations,” Dongre said.
But not everyone agrees with the assessment that India is on a similar track to China’s all those years ago.
“This comparison was more often heard a few years ago than we hear it now, especially in the context of the digital economy,” said Rajesh Magow, co-founder and group CEO of India-based online travel agency MakeMyTrip. “Today’s reality of digital space and online travel is different.”
“India’s digital space has rapidly grown over the last 10 years on the back of world-class digital infrastructure backbone," he said referencing unified payments interface, unique identification numbers, 5G and mobile penetration. "Internet users in India are close to 900 million today, enabling e-commerce growth in India.”
And there are other differences, too, Dongre said, pointing to the current technology landscape, a lower GDP in India and India’s tendency towards a more open market which leads to international competitors as examples.
Regardless of whether India is on the same track as China was some years ago, travel brands in India can learn by analyzing the rise of Chinese counterparts.
“There's no need to reinvent the wheel,” Dongre said. “Instead, they could tailor these lessons to align with the unique dynamics of the Indian market.”
The evolution of India’s travel sector
With average income growth alongside population growth, disposable income to spend on travel will be significant, Dongre said.
“It's a huge opportunity, not just for the companies in India, but outside as well, because the domestic market is growing and so is the outbound market,” she said.
Magow said the foundation for growth in the travel sector is solid, especially as the population is tending toward spending more on experiences.
“India’s young demographic shows a marked preference for exploration, boosting both domestic and outbound travel,” Magow said. “While internet penetration is widespread, with over 900 million connected users, e-commerce, particularly in travel, is growing rapidly but the gap between the two is big in absolute terms suggesting substantial growth potential for online platforms.”
While India's young, connected population is boosting the travel sector, other factors have also contributed to its growth.
Dongre pointed first to technology, citing the period 10 to 15 years back when smartphone use began to grow rapidly in India. Bajpai also said technology adoption happened very quickly.
Dongre described a “leapfrog” moment that occurred when India’s population became quickly versed in mobile technology after a lack of access to laptops and computers.
“That was the point that everything started picking up overall … e-commerce … started gaining traction,” she said.
At that point, online travel became popular and new categories and new players entered the space.
Next, Dongre said, the low price of internet access in India has contributed to that online travel growth, as has the implementation of easy online payment systems such as Unified Payments Interface (UPI), a factor both Magesh and Bajpai pointed to as well.
In addition, India’s advanced infrastructure has made it much easier for people to physically travel.
“The infrastructure in the country has undergone tremendous improvement,” Dongre said. “In the last 10 to 12 years, the number of airports has doubled, which is a huge feat, you know. I mean, we had 70 airports, 70 [to] 75 airports in from independence in the duration of 70 years. But then in 10 years, that number doubled. The government is planning to come up with many more airports.”
Dongre said the highway infrastructure has also seen incredible improvement with India creating lengths and lengths of highways. Rail and destinations have focused on infrastructure, too. And there are initiatives in which smart cities are under development, she said. Furthermore, the government is focused on revitalizing sites fit for tourism such as temples.
A growing population, more discretionary spending and desire to travel add up to a bright future for the travel industry in India.
“Domestically, travel is flourishing, bolstered by state-level tourism initiatives and a growing appreciation for exploring India’s vast cultural landscape,” Magow said. “Internationally, outbound travel has surpassed pre-pandemic levels, again driven by a strong preference for experiential travel and an increasing number of visa-free or e-visa destinations for Indian passport holders.”
All that said, Magow pointed out that inbound travel is “in recovery” but has potential in the long term, especially as India works to strengthen its position as a destination.