The travel diaries

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: The online travel market surpassed US$ 2 billion (Rs 8,000 crore) by 2008—an almost seven-fold increase from the US$ 300 million market in 2005. This is expected to grow to US$ 6 billion (Rs 24,000 crore) by 2010. This unprecedented growth has been made possible by a new generation of urban Indians researching and booking travel on the internet and the partnership between the low-cost carriers (LCCs) and the online travel agencies. LCCs account for close to 40% of India’s domestic travel market. In addition to Air Deccan (now Kingfisher Red Airlines), which has been the pioneer, and Jet Lite (earlier Air Sahara), the opening of the sector has seen the emergence of six new airlines (Go Air, Spice Jet, Paramount Airways, Indigo, Indus Air and MDLR). These LCCs offer short-haul, point-to-point services on a no-frills basis. Most of them have single seating arrangements (all economy, no business or first), their fleet consists of a single aircraft model, and they do not pamper their clients with fancy cuisine. Their objective has been to reduce their cost by 35% to 40% as compared to legacy carriers.

With reduced operational costs, high passenger loads and low staffing, LCCs have aimed to break even within two to three years of their operation. On account of their emphasis on cost-optimisation, these carriers have vigorously embraced the internet and made online travel agencies their logical partners.

Several demand and supply side factors propel this growth. On the demand side, India’s sustained economic growth has resulted in an expanding middle class and a cultural disposition attuned to travel. On the supply side, travel-supplier partnerships with the banking industry have promoted online payment; the information technology sector has allowed homegrown online solutions; the immense growth of online bookings of Indian railways and now the low-cost carriers have acted as a catalyst and the influx of venture capital in the online travel agency sector has given it greater momentum.

One of the biggest contributory factors has been India’s leadership in information technology and business process outsourcing. This has enabled online travel agencies and LCCs to host solutions, build technology platforms and customer service capabilities and provide secure booking engines. Another critical factor has been the huge opportunity available in the internet space, where permission from government agencies is not required. This has led to young entrepreneurs raising resources from venture funds and launching operations.