India’s travel market grew just 1% to $41.7 billion in 2025, a sharp slowdown from the 10% expansion recorded the previous year. The modest growth was driven by operational disruptions at IndiGo and Air India, which hit air travel demand, while car rental services surged on the back of increased road-trip activity. Online bookings rose 4% to $24 billion, representing 57% of total travel spending, whereas offline channels declined 2% to $17.8 billion, according to Phocuswright’s India Travel Market Essentials 2026 report.
Operational Challenges and Government Intervention
The slowdown in air travel was closely tied to operational issues at India’s two largest carriers. IndiGo and Air India faced disruptions that limited flight availability and punctuality, dampening consumer confidence. Meanwhile, the domestic car rental market benefited from growing preference for road trips, particularly as travelers sought alternatives to unreliable air services.
To mitigate rising jet-fuel costs, the government pledged up to ₹10,000 crore in fuel price-stabilization support, a move that indirectly pressured airlines to restructure operations. IndiGo, which reported a ₹2,394 crore net loss for FY26, abandoned its widebody leasing experiment, while Air India announced route reductions in international markets under its new leadership. Both airlines are now under new chief executives: Willie Walsh at IndiGo and Tewolde Gebremariam at Air India.
Projected Rebound and Future Growth
The market is projected to grow 13% to $47.2 billion in 2026, signaling a rebound driven by higher airfares that reflect ongoing jet-fuel cost pressures and the restructuring of airline operations. Online travel penetration is also expected to rise to 62% by that time, as digital platforms continue to capture a larger share of bookings. While the 2025 figures highlight temporary setbacks, the underlying demand for travel remains robust, supported by India’s growing middle class and increasing disposable income. The recovery trajectory reflects the sector’s resilience despite recent headwinds.
AI Suite Launches to Streamline Business Travel Booking
Trip.Biz introduced Agent ONE, an AI suite aimed at reducing business travel booking time by 90%, at its Transform 2026 summit in Singapore. The solution targets global travel-program leakage caused by fragmented legacy systems, digital-only platforms, and in-house programs. Agent ONE includes four specialized AI agents designed to automate and optimize key travel processes.
The Booking Agent reduces average booking time from approximately 45 minutes to 2 minutes through conversational interfaces. The Approval Agent auto-approves low-risk requests, cutting wait times from over an hour to under 3 seconds. The Insight Agent generates savings analysis reports in under 7 minutes, a significant improvement over legacy tools that take roughly a week. Trip.Biz reports its unified platform model achieves a 90% SLA compliance rate and an 80%+ satisfaction score across APAC markets, with Agent ONE now available globally.
Industry Disruption and Technological Shifts
Artificial intelligence is also reshaping how travelers book their trips. Startups like 30 Sundays and Scapia, along with established players such as MakeMyTrip’s Myra 2.0 and Ixigo’s TARA, are deploying AI-driven tools to personalize recommendations and streamline the booking process. These innovations are part of a wider push to reduce friction in travel planning and capture a more tech-savvy audience. The industry’s evolution mirrors global trends in digital transformation. While the 2025 slowdown highlighted vulnerabilities in India’s travel infrastructure, it also accelerated experimentation with new business models and technologies.
Phocuswright’s analysis emphasizes that India’s travel sector remains positioned for long-term expansion, with digital platforms and AI-driven personalization expected to drive significant efficiency gains. The government’s measured support for fuel costs, combined with corporate strategies to optimize operations, creates a foundation for sustained market growth. As 2026 approaches, stakeholders anticipate that the sector’s recovery will be both resilient and adaptive, setting the stage for continued expansion through the decade.