Travel Management Companies

Overview: Size of the Market

The travel market in India is a blend of forces driving growth in an online channel. Drivers and travel management companies on the supply side are dovetailing with social and economic forces on the demand side to both boost online travel adoption and enable India to leapfrog distribution technologies. The result is booming travel demand and rapid uptake of online transaction methods.

The travel market in India (US$13.5 bil­lion in 2005) presents massive online opportunities for legacy and startup travel companies. In a country with over one billion people, whose population is pro­jected to exceed that of China by 2045 according to the United Nations, the mar­ket potential ultimately surpasses that of the U.S. and Europe combined. As far in the future as the realization of this potential may sound, especially for a developing nation, consider that the middle class of India is expected to exceed 100 million before the end of the decade. Furthermore, the number of Internet users is expected to reach that same milestone by 2007.

Travel Management Companies

Travel demand in India has been spurred by the following contributing factors: travel management, companies with sustained economic liberalization and growth, heavy infrastructure investment, a growing middle class, and a cultural disposition more attuned to travel. At the same time, supply factors have driven e-commerce in the travel sector, including: travel supplier partnerships with the banking industry promoting online pay­ments, the early online success of Indian Railways and the explosive growth of low-cost carrier (LCC) traffic, an emerging technology sector permit­ting homegrown online solutions, and a flood of capital into the online travel agency sector.

This two-pronged drive to the Internet is in sharp contrast to other travel markets in the Asia Pacific (APAC) region, such as China, Japan, Korea and Singapore, where demand is the primary force in the development of the online channel.

An early catalyst for e-commerce in India was Indian Railways, a continuing online success story. Indian Railways teamed with financial institutions to boost online transaction comfort levels and increase the number of electronic pay­ment options available to consumers. Now, both LCCs and traditional airlines are driving consumers and agents to book domestic tickets online. LCCs cur­rently represent nearly two fifths of all domestic air gross bookings after less than three years of operations. There is no major market in the world where LCCs have grabbed so much share from traditional travel providers in such a short period of time. The Indian travel market and Indian travelers have been underserved, receiv­ing poor customer service and limited choice. Online travel agencies will rap­idly change the old paradigm, providing customers with a sophisticated online retail and shopping experience, enabling access to a fragmented travel supply market, and consolidating Indian travel options with a pan-Indian approach. The wealth of opportunity has attracted sig­nificant investments in the online travel management companies, where at least seven well-funded players with strong management teams have entered, plan to enter, or are likely to enter the market, further speed­ing the transition online.