Uptick for travel startups: India catching up with US in online bookings

Before the rise of online retail and on-demand apps, ecommerce in India mostly constituted travel bookings on pioneering sites like MakeMyTrip. Even today, travel accounts for more than half of Indian ecommerce.

The growth of online travel in the early days went against the odds because of low internet and credit card penetration in the country. But now, that’s changing fast. The smartphone boom in the last couple of years has given travel startups a lift because of the ease of booking with mobile apps.

Confirmation of this trend comes from new data released by global travel industry research body Phocuswright. Online channels accounted for 39 percent of travel bookings in India last year. And this put India just a few percentage points behind the world’s most mature travel markets in the US and Europe, says its latest report

Apps and hotels are behind the surge

Mobile apps with better user experience are driving this surge. One-fifth of the booking dollars (read rupees) came via mobile in 2014. Phocuswright expects this to climb rapidly to reach US$3.2 billion by 2017.

The travel segment has also gained as hotels of all sizes are now coming online. Online hotel bookings rose 32 percent in 2014 to reach US$800 million. Travel sites like Stayzilla are bringing a variety of fragmented lodging online, from homestays and budget hotels to higher-end accommodation. Leisure planning sites like HolidayIQ are also fueling the market, prompting travel site MakeMyTrip to invest in it. “The opportunity to drive scale jointly is fairly significant,” said Deep Kalra, founder of MakeMyTrip, in a statement this week on a US$15 million investment in HolidayIQ, which will be completed next month.

Phocuswright expects more than a quarter of hotel bookings in India to be made online by 2017. This will make it easier to offer package deals to consumers including both travel and accommodation.

The economy has also come out of a downturn since a new government, perceived to be more business-friendly, came to power last year. A fall in prices of crude oil, which is India’s main import, has helped. The resultant improvement in business sentiment is in turn helping the travel industry.