The travel unicorn doubling in size in 2020 and morphing into a financial services company

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This company will triple its market share and double its revenues in 2020 after posting sales of north of $1 billion in 2019. Around 75% of its revenues do not come from travel transactions. They come from financial products that help customers make better travel decisions. Oh, and it doesn’t rely on Google for traffic.

I’m talking about Hopper, an OTA founded in 2007, headquartered in Montreal, and built on the premise that the combination of big data and AI could fundamentally change the way people plan and book travel.

I recently saw a 1 hour interview with its founder CEO Fred Lalonde. In this November 2020 discussion, Fred talked candidly about Hopper’s business and about the travel industry going forward. It’s definitely worth listening to it, but in case you don’t have 1 hour, I hope you have 7 minutes to read my summary. I was going to simply link to the video on my next Travel Tech Newsletter (by the way, if you’re not yet signed up, I hope you do…it’s free and you’ll receive in your inbox every two weeks), but I decided that Fred’s takes were worth dedicating more attention than simply linking to the video. I hope that you find this summary worthwhile. I have annotated the timing of some of the issues discussed in case you want to jump directly to it.


In march 2020 Hooper was growing 4x year on year. In April they announced a $70 million round that would’ve been $200 million-$400 million in the absence of the pandemic.

(11 minute) Hopper will close 2020 with a 100% year on year growth on revenue in spite of the demand destruction that the pandemic has brought on. Hooper’s marketshare has tripled in the US during the pandemic. This growth is due to a couple of reasons:

  • Hopper is particularly strong in the US, where domestic travel has fared better than in other countries.

  • Demographics. 90% of Hopper’s business is leisure. Massively skewed to younger travelers 70% of Hopper customers are millennials and 25% are Gen Z. These are the age groups that are more resilient and traveling more.

  • (13 minute) Shift to financial services.

Financial Services

Many of Hopper’s air only competitors monetize punitively, marking up baggage, seat selection fees, change fees, etc…(14:30). Hopper asked itself: Could we build a series of products which instead of being punitive, were better? Could we take a ticket that is non-refundable and made it changeable and or cancelable? 75% of tickets being bought in the US are basic economy tickets which are non-refundable. Back in November 2019, Hooper introduced a Price Freeze product that now accounts for 30% of total transactions (16:23), which freezes the price for up to 21 days. If the customer ends up booking the flight within the Price Freeze expiration, the amount paid by the customer for this insurance will be credited to the new booking. If the price goes down, the customer pays the lower price. (16:50) There is an enormous amount of risk associated to offering these products. Hopper takes these risks on their P&L, which is why Fred now refers to Hopper as a financial services company. The magic is that Hopper makes money. It only works because Hopper has a deep understanding on all future pricing in air, and using the same airline and customer database rich with a decade-full of data (18:00). For every travel transaction, Hopper now sells 1.3 financial product transactions (differed types of insurances, freezing prices, making flights changeable or cancellable) (21:50). Between 70–75% of Hopper’s revenues now come from financial products.


In hotels, Fred mentions that they have a big advantage because customers are tracking a hotel price. At that moment, it becomes a closed user group, so Hopper can send the customer push notifications with private rates that are between 10% and 70% cheaper (28:40). 52% of the time, Hooper ends up being cheaper than anywhere in the world. Before the pandemic, the hotel business was doubling or tripling every month. In October, Hopper had its largest month in hotel revenues. Hopper is starting to expand in alternative accommodations. It currently has around 1 million alternative accommodation properties, and is shooting to have between 6 and 7 million properties by the end of the year.


(33:00) Expedia, Booking, Ctrip. In general, anyone selling leisure travel, including metasearches.

(34:00) Fred also “absolutely” views Google as a competitor but the company spends very little time worrying about Google because Google is not the one paying them: “The person who pays me is the person buying travel, so that’s who I worry about. But we also are very different from other OTAs because they don’t do SEM or SEO. Do not advertise on Google. It doesn’t matter from a funnel perspective what Google does from a flight or hotels product. They exist in a mobile world. The head butting space of SEM and SEO is a dead end so we have avoided it since our inception and we continue to avoid it…However, Google is the only technology group that we really fear. They have a customer first approach. They innovate. They try things. They can take risks with travel because it’s such a small piece of the Google machine. We have a ton of respect for what they are doing. They are customer obsessed. They will never do things to harm the Google user. We view that as our own competitive advantage so we take very seriously any competitor who puts the customer ahead of their own short term revenue. Fundamentally their products are designed with the customer in mind, and that’s what we find scary because that’s where we think the competition is.

Fred says that everything about competing with Amazon is terrifying. Amazon has the most robust global payment system along with Alibaba. And knows everything about commerce. His theory is that Amazon is built on their fulfillment capabilities (warehousing, shipping), and they get no advantage out of travel. But he thinks that the day will come. Amazon is getting in other categories like pharmacies. Amazon will come to the travel sector and the idea of competing directly with Jeff Bezos should be scary to anybody. For good reasons. They’ve earned it. (This section on Amazon is from later in the interview…49:28)

The travel industry landscape

  • (36:22) Fred does not think business travel comes back to where it was before. Because of remote work. Over 2 billion people have learned to work from zoom. All the CFOs saying all this travel is not necessary, they got the AB test of the millennium, and they were essentially right. This matters because although corporate and leisure bookings were traditionally 50/50 industry, but revenues were highly skewed towards corporate. The entire industry is going to have to rebalance its margin structure in a world where corporate is depleted.

  • Once the vaccine kicks in, there will be a leisure boom because of “revenge travel”. But the profitability won’t be the same.

  • Prices are going to inch back up slowly. Airlines and hotels will keep their rates relatively low. Hopper’s average order value had always been at around $400. Now it moves every week. Gone as low as below $200, and it’s gone to around $300 but it goes up and down now. It shows suppliers’ level of concern.

  • In a world with increased price volatility and decreased profitability, only the innovative companies are going to do well. “All this about everything being stable, putting $5 billion in Google and get $7 billion back, we think those days are gone. Formidable companies are probably not going to fold, but keeping on doing what you were doing before with a 5% growth, is not going to hold”.

  • (41.05) Airbnb. Airbnb was trying to be multi product, then the pandemic hit, and now they are fully focused on their core business. So the real question is how disruptive is Airbnb going to be in the long run. The team is very different from the team in the big travel companies, so it will be very interesting to see what Airbnb does in terms of their multi product strategy.

  • There was a big boom in tours and activities; companies raising hundreds or millions. All that got disjointed. But the attractive part of this space is that it generates high frequency. And if you’re in the app business, high frequency is the difference between life and death because you don’t end up relying on Google’s SEM and SEO. How they recover and how they innovate will be interesting going forward.

  • Very interested in the meta category because the meta does not work on mobile. Anybody telling you otherwise is lying. You cannot get the same user economics. Clicking in and out does not work. Companies that have a formidable content base like TripAdvisor or formidable reach like Kayak and Skyscanner are still trying to figure out their mobile business. Same for book on Google. How that plays out post pandemic will be fascinating. The real question is once you reset everything, demand comes back, business is disjointed, what are all these third party companies going to do to adapt to the new reality.

  • Fred is big fan of is Tripactions. They’ve built something amazing and he has a sense that they will come back and figure it out.

Fred fundamentally thinks that the only way to get marketshare is to invent something new, and that the pandemic and post pandemic will shine a spotlight in the companies that think that way and focus on that, rather than continuing to collect rent.


All of the financial products that Hopper has built for themselves are also available in a b2b offering on a revenue share basis (44:28) . Offer that to any provider of travel products: OTAs, metasearch, airlines, hotel companies. Risk as a service. There is a lot of demand for these type of products.

(48:34) Hopper did around 200 layoffs earlier in the year, but now they are rehiring and have around 40 open positions and hiring rates are accelerating.

Hopper is not going to sell to Amazon, Google: “Doesn’t matter the amount. We wouldn’t sell”.

What struck me the most from this interview is that Hopper is investing in building trust. The way they have priced and structured their financial and travel products shows that they are putting skin in the game and leaving money on the table. They could surely collect more money and get more short term benefits by optimizing revenues per transaction, but Hopper is investing in building trust with consumers and in building something new. The return of this investment in trust will far compensate whatever money they are leaving on the table.

This consumer-centric focus is unfortunately not that common in the travel industry, where companies have a more short-term focus and need to extract as much revenue per transaction as possible. OTAs have traditionally been very good at optimizing transaction revenue, but less so in thinking in terms of long term customer acquisition. Hooper seems to be operating more similarly to an Amazon or Google than a traditional OTA. Maybe because that’s who they see as their long term rivals. As Fred said, that’s the sort of companies that Hopper fears the most, because they share Hopper’s competitive advantage: a customer-centric obsession.