A new report by PhoCusWright, "The Emerging Online Travel Marketplace in India," estimates that online leisure/unmanaged business travel gross bookings in India totaled $295 million in 2005 and will grow nearly sevenfold in just three years to go beyond $2.0 billion by 2008.

Both supply and demand forces are responsible for the booming growth. Sustained economic liberalization, heavy infrastructure investment, the growing spending power of the middle class and greater public interest in travel are driving demand. Meanwhile, supply side forces include an improved online payment system, the online success of Indian Railways, an emerging technology sector and the rise of low-cost airline carriers (LCCs).

PhoCusWright noted that, as in many other travel markets, LCCs have been instrumental in driving Indian consumers to use Web sites to arrange their bookings. This idea was echoed by TravelMole, the online travel industry publication, which reported earlier this year that India's domestic air travel market is likely to grow 20% annually over the next five years, boosted by new airlines and low fares.

Last year 2.2% of total travel was booked online in India, but PhoCusWright forecasts that strong growth in the Internet channel will cause the percentage of online bookings to approach double digits by 2008. Despite the optimistic outlook, several hurdles lie along the growth path, including a fragmented travel market dominated by family-run businesses, low Internet penetration and credit card usage and a shortage of quality budget hotels.

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