In Brief: India’s travel market grew only 1% to $41.7 billion in 2025, but Phocuswright expects a 13% expansion in 2026, driven partly by higher airfares, domestic travel demand and continued growth in online bookings.
-
India Travel Market Slows in 2025 as Higher Fares Drive Forecast Rebound – Image Credit Unsplash+
Market growth slows after 2024
India’s travel market increased by 1% in 2025 to reach $41.7 billion, according to Phocuswright’s India Travel Market Essentials 2026 report. The result marked a significant slowdown from the 10% growth recorded in 2024.
Performance differed across travel segments. Air travel was the weakest category, affected by operational problems at IndiGo and Air India. Car rental was the fastest-growing segment, as uncertainty encouraged more travelers to choose road trips.
The travel market also continued to shift toward online channels. Online gross bookings rose 4% to $24 billion, while offline bookings declined 2% to $17.8 billion. Online sales represented 57% of the total market in 2025.
Forecast points to a fare-led rebound
Phocuswright projects the Indian travel market will grow 13% in 2026 to $47.2 billion. Part of that increase is expected to come from higher airfares rather than solely from greater passenger volumes.
Domestic travel is expected to support demand for accommodation and car rental. The report also said geopolitical uncertainty could continue to direct travelers toward destinations within India instead of international trips.
Growth is forecast to moderate to 7% in 2027 before returning to roughly 8% annually through 2029. The market is projected to reach $59.1 billion by 2029, while online penetration is expected to rise to 62%.
Fuel costs pressure airline finances
Rising aviation turbine fuel costs have become a major issue for Indian airlines in 2026. Airlines have introduced fuel surcharges and raised ticket prices, but price-sensitive consumers and competition from rail and road travel on shorter routes limit their ability to pass on costs.
The government has committed up to ₹10,000 crore in price-stabilization support for aviation turbine fuel. The measure reflects the pressure on airlines, particularly as fuel costs, currency movements, and longer international flight routings affect operating expenses.
Air India has reduced parts of its international network. IndiGo plans to end its leased widebody operation in October, citing weaker economics for international flying amid higher fuel costs and currency pressure.
IndiGo reported profits in FY24 and FY25 but posted a net loss of ₹2,394 crore in FY26. The company remained unprofitable in the first quarter of FY27 despite higher passenger revenue. Other Indian carriers were also facing losses before the latest fuel-cost increase.
Both IndiGo and Air India are operating under new leadership. Willie Walsh became IndiGo’s leader in August, with responsibility for improving operations and expanding international operations. Air India appointed Tewolde Gebremariam to lead its turnaround, focusing on reliability, safety, hub development and financial performance.
Phocuswright expects the airline segment to grow 16% in 2026, partly because of higher fares. Growth is expected to slow in 2027 before increasing again in 2028 and 2029.
Travel companies expand across services
Online travel agencies are expanding into services beyond their core offerings. MakeMyTrip acquired a majority stake in group-tour company Flamingo Transworld in March 2026 and is moving further into tours and attractions. Ixigo’s acquisition of Brevistay provides access to short-duration hotel stays.
Cleartrip added rail bookings to its existing flights, hotels and bus services. EaseMyTrip has focused its EMT 2.0 strategy on hospitality, holidays and mobility services.
Suppliers are also seeking more direct access to travelers. Air India sells Booking.com accommodation through its own channels and offers Maharaja Club points on those bookings. IndiGo sells hotel stays and links its loyalty program with Accor.
Indian Railway Catering and Tourism Corporation sells overseas holiday packages, while Radisson Flights combines hotel and flight bookings. These moves indicate that airlines, hotels, rail operators and online agencies are competing to manage more of a customer’s travel spending.
Artificial intelligence enters booking and servicing
Artificial intelligence is becoming more central to travel planning, booking and customer support. Startups including 30 Sundays, The Tarzan Way, Rimigo and Scapia are using AI for itinerary planning, trip management and experience selection. Several received venture funding in 2025 and 2026.
Established companies are also expanding AI tools. MakeMyTrip’s Myra 2.0 can handle search, comparisons, booking and payments through a conversational interface. Ixigo has redesigned its app around TARA, an AI agent that can help users plan and book travel.
Air India’s AI.g supports planning, booking assistance and servicing. RateGain is applying AI to hotel marketing, distribution and revenue management following its acquisition of Sojern.
The sector’s next competition will likely focus on which company can most effectively convert travel planning into a completed booking and support customers throughout the trip.