Hopper Raises $170M & Partners with Capital One for Travel Booking

Hopper Secures $170 Million Series F Funding, Launches B2B Platform

Canadian travel technology company, Hopper, has successfully completed a $170 million Series F funding round. Capital One spearheaded the investment and will also function as a strategic partner. This collaboration will result in the launch of Capital One Travel, representing the initial application of Hopper’s innovative B2B platform, Hopper Cloud.

Navigating Pandemic-Era Challenges

This funding arrives amidst ongoing recovery efforts within the travel sector, following significant disruptions caused by the COVID-19 pandemic. Just last March, Hopper secured $70 million in a funding round, with Inovia Capital making its first investment in the company during a period of substantial uncertainty for the travel industry.

Inovia Capital’s Investment Strategy

Patrick Pichette, a partner at Inovia Capital, explained the rationale behind their decision to invest in Hopper during the pandemic’s initial phase. He highlighted the company’s demonstrable transformation prior to the crisis. Inovia’s investment philosophy centers on identifying companies with the potential for global expansion and a strong emphasis on differentiated technological innovation.

From Fare Finder to Fintech

Pichette noted a key shift in Hopper’s business model. Prior to the pandemic, Hopper was primarily recognized as a machine learning-powered platform for finding the lowest airfares. However, co-founder and CEO Fred Lalonde asserts that the company has evolved into a more comprehensive fintech enterprise.

Financial Flexibility and Innovative Services

This evolution is largely attributed to Hopper’s ability to provide customers with enhanced financial flexibility regarding their travel arrangements. Lalonde detailed several key offerings, including price freeze options – allowing users to secure a booking price for a defined period – flexible date plans, and cancellation protection for non-refundable tickets.

Disruption Insurance and Rebooking Assistance

Hopper also provides disruption insurance, a rebooking service for passengers experiencing missed connections. Should a traveler miss a connecting flight, the service presents all available flight options to their destination, regardless of airline, at no extra cost.

Impact of the Pandemic and Subsequent Recovery

The pandemic undeniably impacted Hopper’s business, leading to a workforce reduction of approximately 45% last year. However, Lalonde reported strong adoption rates for products designed to provide booking stability during this period. As the U.S. travel industry begins to recover, customer behavior is proving more consistent than initially anticipated.

Increased Demand for Peace of Mind

“Interestingly, as demand has rebounded, we’ve actually surpassed our pandemic-era attach rates,” Lalonde stated. “Customers are increasingly opting for these services, which we attribute to ongoing product innovation.”

Validating the Fintech Approach

Lalonde believes the pandemic validated Hopper’s fintech strategy. Despite initial concerns regarding the liabilities associated with this approach, the company demonstrated resilience during an unprecedented crisis. The pandemic served as a “black swan event,” proving the stability of Hopper’s model in practice.

Revenue Stream Stability

“Initially, we experienced a period of approximately 30 days of losses,” Lalonde explained. “However, we’ve since returned to profitability across all areas. The way future travel credits functioned and the refund process contributed to a remarkably stable revenue stream.”

Addressing Customer Service Challenges

Despite the company’s overall performance, Hopper faced criticism regarding customer service during the pandemic. The company’s app reviews and social media channels were flooded with complaints concerning refund issues and communication failures. Lalonde acknowledged these shortcomings and stated that Hopper is actively hiring hundreds of additional call center staff to improve customer support.

Automating Flight Credit Management

A significant challenge stemmed from the unprecedented volume of future travel credits issued by airlines. Manually processing these credits proved incredibly time-consuming, requiring approximately 20 minutes per voucher. Hopper prioritized automating this process, despite facing public criticism in the interim.

Prioritizing Automation and Long-Term Solutions

Lalonde explained that existing automation solutions were inadequate, as non-refundable airline ticket credits were not previously common at such a large scale. Hopper made a strategic decision to focus on automation, accepting short-term reputational damage to achieve a long-term solution.

Expanding Product Offerings

With the automation in place, Hopper has addressed the backlog of credits and shifted its focus to new product development. This includes expanding its offerings to include car rentals and hotel/holiday home bookings, catering to the growing trend of overland travel in North America. Consequently, international expansion has been temporarily deprioritized.

Introducing Hopper Cloud

A key component of the company’s future strategy is Hopper Cloud, a B2B offering that extends the benefits of Hopper’s price prediction technology and fintech travel insurance to other businesses. The Capital One Travel partnership exemplifies this approach, integrating Hopper’s capabilities with Capital One’s rewards program.

Maintaining a Direct-to-Consumer Focus

Lalonde emphasized the importance of maintaining a direct relationship with customers, even with the introduction of B2B partnerships. He believes that a direct marketplace provides valuable insights and allows Hopper to respond effectively to customer feedback.

“I believe maintaining the marketplace is crucial,” Lalonde concluded. “It’s growing rapidly and profitable, but even if it weren’t, losing that direct connection would distance us from the end customer. I value the proximity and the ability to learn from both our successes and our mistakes.”