Hopper nabs $100M, wants to be "number-one mobile travel marketplace in the world"

Hopper is initiating a massive growth strategy fueled by a $100 million Series D financing round announced today.

The funding was led by OMERS Ventures, with participation from existing investors Caisse de dépôt et placement du Québec, Accomplice, Brightspark Ventures, Investissement Québec, BDC Capital IT Venture Fund and new investor Citi Ventures. It brings the company’s total funding to date to $184 million.

The mobile app combines data and artificial intelligence to predict future prices for flights and accommodations, which can all be booked in the app. The app has sold nearly $1 billion in bookings since it launched in 2015.

With the new funding, co-founder and CEO Fred Lalonde says it will focus on expanding the app’s presence globally, starting with Europe, Australia and Latin America, developing its use of AI and doubling the size of its workforce to about 400.

Global growth

The app has been available in 120 countries around the world since it launched, and today about 25% of its sales originate from outside North America, but Lalonde says that growth has been organic. Now Hopper is working to bring on more international carriers, including low-cost airlines, to ensure the app has the lowest fares on all routes.

“We’ve been playing a strategy of getting all of our inventory, all of the rates, all the last carriers, no matter how small or big or off the global distribution systems, making sure we have a global, full market view in order to become the best transactional platform in the world on mobile,” Lalonde says.

“The proceeds from this fundraising are about building Hopper into a global mobile brand - I would say the number-one mobile travel marketplace in the world. And when you look at where the trend is, I can see us in the course of a year or two being more than 50% international in terms of sales. That would not be crazy given that it’s already become a quarter in a short period of time.”

Lalonde says this latest funding round was prompted in part by the early success they have had in boosting the app’s international presence, with year-over-year growth between 100 and 300% in key markets in Europe and Australia.

“We are now at 30 million installs,” Lalonde says. “I have a personal goal of getting us to 250 million installs in the next three to five years.”

Along with increasing inventory, the new funding will be used to improve the digital experience for international users, by adding languages - Hopper is currently only available in English - and global payment options.

Smarter service

The new funding will also be used to accelerate development of Hopper’s use of AI and machine learning.

The company says one-quarter of the bookings done in the app are the result of AI - meaning they are trips suggested by the app but that the user did not explicitly search.

“We spent a lot of time and money building our platform before we launched,” Lalonde says.

“Our core advantage, why Hopper is growing so fast, why we are able to compete against the giants - Booking.com and Expedia and Ctrip - is because of our data and AI.”

As the app’s database of historic prices continues to grow, along with the addition of new product inventory and more users, Lalonde says that AI will become even smarter and better able to guide purchasing decisions.

For the upcoming holiday season, Lalonde says it has “embarked on a massive project” to tweak how the app’s predictive engine functions so it can provide better results for holiday travelers.

And new uses of the AI are in the works.

“The new frontier we are working on now is, What if it was cross-category? What can we infer from your air shopping behavior to inform your hotel purchase?" he says.

“Does the behavior in one part of the purchase influence the other? And the answer is yes, absolutely, it’s a very, very high predictor. So as you are looking at air, we can figure out what you’ll want in lodging and not only give better recommendations but also different pricing.”

Lodging

Hopper added hotel price prediction and booking in October 2017, starting with New York and gradually rolling out in 20 markets around North America.

The company says it currently has about 1,600 properties in the app, but that number will soar to 100,000 worldwide by the end of 2018 and to 200,000 by the end of 2019.

“Hotels is still tiny compared to air,” Lalonde says.

“But I think we’ve found a really interesting model. What we are finding is that selling long leads - not last-minute, what a HotelTonight would be doing – selling long leads over the mobile app is absolutely possible.”

The initial focus is creating an inventory of traditional hotels, but Lalonde says it's not ruling out home-sharing. “Given that our user base is primarily millennials, alternate accommodations is of interest to us.”

In the future, Hopper may also add air and hotel packages since data can be used to predict a user’s lodging interests based on their air queries and vice versa.

App-only

Lalonde says Hopper’s unique position as a mobile-only app product is part of what has driven high user engagement.

“Because it’s your phone, because it’s in your pocket, because you have push notifications installed, you’re talking about seeing that user every four to five days,” he says.

He says mobile has allowed the company to pull customers “out of all existing brands. Every metasearch site, all the search sites, all of the OTAs, we view as competitive.” 

“Once somebody has bought from Hopper there is a one out of two chance we become the starting point for their travel journey,” Lalonde says.

“They will not go back to Google to start. They may price check us on Google Flights or Google Hotel Finder, but Hopper has become the place they start their travel intent. The only way we are able to pull that off is because we are mobile-only.”

As Hopper works to grow its customer base, Lalonde says it may explore allowing users to input payment information such as credit card numbers on the web, to serve customers that are more comfortable typing on a laptop than on a phone.

“We are just out there to acquire the largest user base and deliver the best possible marketplace to our users,” he says.