As COVID-19 ebbs and flows and a sustainable re-opening for business and leisure remains shrouded in uncertainty, at least one thing has become clear; people everywhere are itching to pack their bags, get outside and travel again.
“The one thing this pandemic has proved is that people want to travel and they’ll do it as soon as they’re able to,” Hopper Co-founder and Chief Executive Fred Lalonde said in an interview with PYMNTS’ Matt Nesto.
Hopper, which started as a simple airfare price prediction app, believes it stands to benefit from that trend, as well as the extra cash people have in their wallets, by creating an entirely new set of financial services baked into its travel bookings.
“When somebody buys travel on Hopper, they’re spending an average of $50 more than if they bought that same product elsewhere,” he said. “That’s because 60 percent of people who book on our app also add a FinTech product. When you’re throwing up extra money like that, you can do a lot of things with it.”
Montreal-based Hopper’s business isn’t the only source of funding that’s growing. Last week, it raised $175 million in a late-stage Series G funding round led by GPI Capital, with participation from Glade Brook Capital, WestCap, Goldman Sachs Growth and Accomplice.
It’s money the company plans to use as it pursues new verticals stretching to almost every space associated with travel, including short-term vacation home rentals, activities and experiences and business travel.
Hopper made its name with airfare bookings, offering price freeze services that allow consumers to lock in a lower price for their tickets, then expanded into protection services such as cancellations and refunds.
“We take non-cancelable tickets and non-refundable tickets and we make them cancelable and refundable, for a fee,” Lalonde explained. “But the fastest growing service we offer is disruption protection. So, if your flight is delayed or you miss it for any reason we can rebook you on the next, most convenient flight from that airport, even if it’s with another airline.”
But it was the move into hotel bookings and car rentals that really kick-started Hopper’s latest growth spurt, Lalonde revealed.
“That’s probably the most important transformation of our business model,” he said. “Those products now represent about 50 percent of our travel bookings. And all we did was apply the same principles that we did in the air, which is to always source the lowest price. About 50 percent of the hotels we offer are now cheaper than you can find on the web.”
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Hopper has recently expanded into the B2B realm, too, with its new Hopper Cloud initiative, which makes its travel FinTech products available to any third-party that’s looking to sell travel services. That too has been a roaring success, Lalonde told Nesto.
“It turns out that if you’re in the middle of a pandemic where everyone’s revenues are down and you can go to them and ask if they’d like to make an extra $50 per booking, unsurprisingly the answer is always yes,” he said. “The Hopper Cloud offering has been growing like crazy and we’ve signed up customers on every continent. It’s an enormously successful initiative.”
Airlines routinely tack on fees for what used to be free, and Lalonde explained Hopper had become the first FinTech startup to find a way to squeeze more money out of the average traveler since online bookings became a thing.
“You can go back to 1994 when the first ticket was sold on Travelocity. Everybody has been fighting for a cut of the same $340 transaction,” he said, referring to the average airfare spend online. “Fundamentally, customer spend has remained constant up until the point where we added these capabilities.”
Lalonde thinks he can coax even more spending out of travelers. He spoke of a coming “supercycle” that has been forecast for domestic air travel in the U.S., Europe and China, noting that people are desperate to get out and travel again after spending the best part of the last 18 months locked inside their homes.
“As people are able to go back to places like Florida, Louisiana when it becomes safe again, you’re going to see people traveling,” he insisted.
Business travel will rebound too, Lalonde said, confounding his own earlier prediction. He told Nesto that a year ago, he was convinced the rise of Zoom and video conferencing would sound the death knell for business travel, only for that segment to recover to almost pre-pandemic levels until only a few weeks ago when the delta variant of COVID-19 knocked things back.
“I think we underestimated how much people want to travel to do business,” he said. “I think travel is just intricately tied to the culture of business.”
If Lalonde is right about the reemergence of business travel, Hopper stands to benefit in a big way, he said. Although currently 90 percent of its app bookings are related to leisure trips, that’s changing.
“On the Hopper Cloud side we have customers that are on the business travel side who we’re talking too, so you’re going to see that shift,” he said.
Another major focus for Hopper is making acquisitions with an eye to driving expansion in new markets and segments. The company is currently plotting a route to the international markets.
Lalonde said he sees acquisitions as an essential component of the company’s growth strategy. Its new home rentals offering, for example, was launched after it acquired a New York-based startup called Journey.
“The way we launch new businesses is we always put great leaders in them,” Lalonde said. “Hopper Cloud and Hopper Cars were both built by teams we acquired. We love it when people have founded their own company because it always leads to better outcomes. It’s a great way to keep the furnace of innovation burning.”