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Ground transport is propelling India’s remarkable growth in the online travel market, with the intercity bus category leading the charge at an astonishing 21 per cent compound annual growth rate (CAGR). This segment’s rapid expansion outpaces the overall online travel market’s projected 18 per cent CAGR from FY23 to FY26. In FY23, the combined valuation of the rail and intercity bus categories accounted for ₹1,156 billion ($14.5 billion), constituting 30 per cent of the total travel market. By comparison, the total air market for the same period stood at ₹1,743 billion ($21.8 billion), commanding a 45 per cent share of the overall travel market, as reported by travel consultancy firm Videc.
An industry expert emphasises the significance of a diverse mix of transportation modes to bridge the connectivity gap between India’s major cities and remote regions. Over the past decade, substantial investments in robust infrastructure, such as railways, tracks and highways, along with advancements in digital technology, have played a pivotal role in transforming the ground transport sector. This strategic focus on technology, coupled with a strong emphasis on human capital and customer satisfaction, has been the key to the category’s remarkable turnaround.
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Within the ground transport segment, both rail and intercity buses play critical roles, catering to varying levels of connectivity across the country. Indian Railways, with its extensive network and impressive electrification progress, remains an unparalleled mode of transportation, experiencing a robust 23 per cent CAGR in the online rail market.
In the rail segment, ixigo leads the way, capturing an impressive 47.7 per cent share, closely followed by MakeMyTrip with a 10.2 per cent share. Other players, including yatra.com and EaseMyTrip, each hold a 1 per cent share. Moreover, over 40.9 per cent of gross bookings in this segment are attributed to IRCTC and other online travel agencies (OTAs).
Unique opportunity
The intercity bus category presents a fragmented landscape, comprising over 4,500 private bus operators and 25 State Road Transport Corporations (SRTCs). Among the prominent players, MakeMyTrip Group stands out through its subsidiary redBus, securing a commanding three-fourth share. Meanwhile, ixigo Group, with its subsidiary AbhiBus, is also making significant strides, holding an 11 per cent market share.
For OTAs, the ground category offers a unique opportunity, providing high booking volumes at comparatively lower customer acquisition costs. In an intensely competitive market, the ability to offer personalised products, quick gratification, and seamless gamification experiences sets OTAs apart. Their success lies in driving revenue through high-volume, lower ticket size transactions, cultivating loyal consumers, and integrating fintech products.
The evolving ground transport category sets the stage for India’s online travel market to unlock its true potential. As the next billion Indian travelers enter the online travel landscape, ground transport takes center stage in this transformation.
Aloke Bajpai, Founder and CEO of ixigo Group, highlights the significance of ground transport in shaping the industry’s future. The success of ixigo Group, operating at nearly six times its pre-COVID run rate and achieving remarkable growth in the rail and intercity bus segments, attests to the profound impact of ground transport on the company’s performance.
MakeMyTrip’s recent results further underscore the growth potential in the bus segment. With revenues growing by 22.8 per cent in Q1 FY24 and adjusted margins increasing by 39.7 per cent y-o-y to reach $27.3 million, the surge in bus ticket bookings indicates sustained elevated travel demand in India. This strong demand, observed in the quarter ending June 30, 2023, reinforces the crucial role of ground transport in meeting the country’s growing travel needs.
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