Hopper, which helps travelers find low fares on flights, hotels, and rental cars, is usually called a travel-booking app. It also fits the definition of an online travel agency, or OTA, a label that covers any business that sells travel online. OTA is a helpful category because many brands in travel, among them TripAdvisor, Kayak, and Google, only provide lead generation, Hopper founder and CEO Fred Lalonde explained. His background in travel goes back to 1997, when he cofounded Newtrade Technologies, a system for linking hotel reservation systems and electronic distribution channels. He later served as a VP at Expedia, which bought Newtrade in 2002, before he began the big-data-for-travel effort that became Hopper.
Setting the technical definition aside, Lalonde thinks Hopper “behaves more like an Asian-style marketplace” than an OTA. At times, he has also labeled his seven-year-old app “fintech,” to reflect the growing set of add-on products that Hopper users can purchase alongside bookings. “Super-app” is another term Lalonde has used — but only when talking about future goals.
Lalonde discussed some of these labels in this interview. He also gave his views on subjects such as generational differences in search, the simple fact that all travelers worry about something, the creative use of gamification in travel, and how price forecasts became Hopper’s signature in the first place.
You launched Hopper in 2015. You’ve said its original aim was to help travelers work out the ideal time to book a flight to secure the best fare. How did you settle on that focus?
FRED LALONDE: We actually didn’t settle on it. It was a pivot — and not one we chose willingly. We had started out building big data for travel. At first, we were trying to do price discovery — “I want a direct flight to a beach where I can take my kids.” That was the same year Google spent a billion dollars on OTA software to do the same thing. It turned out that isn’t a real use case. It’s not something people want to do.
While we were building that first product, we had a few people doing data-driven journalism and publishing pieces with the data we had gathered. Then we got in touch with someone at the New York Times. Rather than writing the story we suggested, he wrote about the data itself. He said, “There’s a website called Hopper that can tell you which day to buy your ticket, depending on where you’re going and which dates you are flying.”
It became the second most-emailed article in the Times that week. It later appeared in print, and the following day we were on Good Morning America. We gained a million website users in a single day. If you know anyone in travel, at every holiday party and every get-together, everyone asks them one question: When should I buy my ticket? Even though Expedia and other companies had been around for 20 years, nobody had tackled that problem. We essentially solved it by accident.
By the time Hopper officially launched, it was mobile-only. Did that feel like a risky decision then?
Yes, it was insane. Fewer than 10% of digital travel bookings were made on mobile. I called my friends at Expedia and they all said, “You’re nuts. Don’t do it.” But I was on the board of a company called MakeMyTrip, India’s largest OTA. Roughly a year before inexpensive Android phones arrived in India in 2009, you saw the same pattern there, with about 12% or 13% of travel on mobile. Then, within one quarter, it rose to 70%. So I said, “Let’s get ahead of the curve.”
Almost everybody has one thing they worry about when they travel — some people care about prices, others care about arriving on time, some people are simply afraid the hotel will be bad. But nobody worries that everything will go wrong.
And one thing that happened was that we ended up winning over a totally new demographic. By downloads, we became the app of choice for millennials and Gen Z in about two years. Today, we have around 70 million downloads.
Right, millennials and Gen Z make up 75% of your customer base. Have you seen different patterns in how the two generations behave?
Yeah. “Elder” millennials are a real thing — they’re about 40 now. Compared with them, the younger part of the millennial cohort and Gen Z are very different. They’re fully mobile-first and basically mobile-only. They don’t use TripAdvisor. They don’t go to search. They act like Asian populations do, beginning on social and then moving to the app.
But across travel, we’ve seen a really interesting shift coming out of the pandemic — there was an almost 14% rise in mobile bookings. The habit of buying everything on your phone seems to have embedded mobile-first behavior in older people too.
Did you deliberately aim to capture the younger generations from the start?
That was always intentional. It’s important to remember that we didn’t invent a cryptocurrency platform or solve ride-sharing. We were working in a market that was already mature. The idea that we’d knock off Expedia and Booking.com, which own almost every travel brand you can think of, except Airbnb — and do a better job selling hotel stays on Google — was just ridiculous. So we needed a different strategy. When you’re trying to do something like that, you have to bet on technology shifts and generational shifts.
Today, 70% of Hopper’s revenue comes from selling what you call “fintech products,” which are non-refundable, a la carte booking add-ons. For example, a customer can choose to pay $30 to lock a flight price, or pay a certain amount to cancel a flight, or to change hotels if their room doesn’t live up to expectations. How does Hopper provide these add-ons without help from airlines, hotels, and rental car companies?
It’s straightforward: We make all suppliers whole when the customer gets a benefit. There are a few different groups of add-ons: We’ll lock a price for you if you want prices to stop changing while you decide. And if the price rises by a set amount, we cover the difference. Or you want flexibility — to take something non-refundable, or non-changeable, and make it refundable or changeable. Or you’re worried something awful is going to happen. You pay with your money when you book, but we pay with our money for the new hotel room.
If everyone were using apps to book travel, which is what young millennials and Gen Z do, there would be one dominant app. So the question is, what else does that app need to do for you to use it for other things?
The key point is that it’s a risk pool. The origin of this was that when we talked about our price prediction, we’re right 95% of the time. We tell you to wait six weeks to book a flight, so you wait and save money. But what about that 5% of the time when we’re wrong?
With technology, if you can predict things, if you can build a digital experience, then in theory you should be able to remove every possible risk you face when you travel. It turns out that A) you can, and B) almost everyone has one thing they worry about when they travel — some people care about prices, others care about arriving on time, some people are just worried the hotel is going to be bad. But nobody worries about everything going wrong. Today, at least one of these add-ons is attached to 70% of the travel transactions we sell. When customers buy them, they average 1.7 per booking.
If the average number of add-ons purchased per customer went up, would that change your ability to offer them? Let’s say customers began buying three or four each, instead of 1.7?
Well, what you’re describing is a pandemic. So yes, we have seen tap rates rise very high. But one way to think about it is as a portfolio: When there are product disruptions — a variant like Omicron appears, or there are staffing shortages and 1 in 4 flights is being canceled, people hear that in the news, they add our Flight Disruption Guarantee. But you know what’s happening at that point? Prices are low because there’s a pandemic. Then the pandemic ends and prices start rising, and they care less about disruptions, but now they want to freeze prices.
In that first month of the pandemic, when all the planes in the world were grounded, we lost money because we had to refund 500,000 people. But aside from that, in every month since, these add-on products have been profitable because they essentially hedge each other the same way a hedge fund has a portfolio that is long and short at the same time, depending on what its thesis is.
The Western drive for social behavior—keeping up with friends, showing off, and posting—isn’t the only route. People will do it for rebates. They’ll do it for discounts.
We carry a huge amount of hypothetical risk, but not everyone is going to wake up on the same day and cancel a flight for no reason. And it turns out that when there’s a global catastrophe that shuts down all the planes, airlines issue future travel credits. So we didn’t actually need to refund people; we only had to rebook them. I think we’ve encountered every kind of oddity except aliens invading Los Angeles. I can’t tell you what happens then.
Do the add-ons appeal most to a particular slice of your customers, or have they shown wide appeal across your customer base?
If there is a pattern, we can’t identify it. What we have discovered, though, is that each person has a preference. So some people will never buy price protection, and some people will always buy it. That makes it seem as though the more of these we introduce, the wider the portfolio’s appeal becomes. We recently ran an experiment with a hotel bundle. You can pay extra to protect yourself from whatever goes wrong. It appears to be well liked because, I think, everyone is a bit uneasy about many different hotel-related things. But in air travel, people are used to picking and choosing. Just look at low-cost carriers, where everything is an add-on. What people fear when booking a car is different as well. All these travel types are different by nature, even though they belong to the same trip.
Some of the add-ons you offer are also sold by airlines as part of the ticket price. If you buy a business class ticket, or even premium economy, it likely includes free cancellation. So these added conveniences are not all brand-new concepts. But it seems you’re making them available to everyone for a fee, rather than as a benefit for a chosen few. Is that correct?
It is, with a few caveats. Cancel For Any Reason is probably a good illustration. A business class ticket costs about an order of magnitude more. Cancellation is included, and that makes sense. But many leisure travelers are not buying those tickets; most people who travel do so in economy and basic economy, or they stay at three-star hotels. And those rates don’t include all of these things. Half of the bookings people make are discounted rates, and those aren’t cancelable or changeable. With Hopper’s Cancel for Any Reason product, you pay a premium up front. Then, if you use the plan, you get back at least 80% of your money.
Second, we don’t want to interfere with our suppliers’ revenue management. One reason they have this is for business travelers, where the traveler isn’t paying, so they want to buy the premium stuff. The last thing you want is to build a product that wipes out the airline, or the hotel, or the car rental company’s business, because that simply isn’t sustainable. Everyone has to gain. As a very smart friend of mine once said, “There are two ways to make money, bundling and unbundling.” We’ve unbundled the high-end products.
Leisure customers who are trying to get a good deal will spend $50 to calm their anxiety, but they don’t want to overpay for something they see as a commodity. We didn’t invent that idea. We’re just working out how to do it well in this category.
In 2021, Hopper was the No.1 fastest-growing OTA app, followed by Expedia, Hotwire by Expedia, and Booking.com. You’ve described Hopper as moving toward becoming the first travel super-app in North America. From your perspective, what does Hopper, or any travel app, need in order to become a bona fide super-app?
There’s a striking split between East and West right now. In China, Pinduoduo launched the same year we sold our first ticket. And Alibaba has basically been around as long as Amazon.
One interesting thing when you look at Southeast Asia is that credit card use has historically been low, so companies had to create digital wallets. In my opinion, the super-app is an accidental outcome of the Asian evolution of e-commerce.
Also, when people shop for leisure travel on a desktop, old people like me look at an average of about 38 websites before we book. Because of that, Google is the dominant travel platform. They’ve collected billions of dollars a month for decades. Everyone goes back to Google and searches, but nobody jumps among 38 apps that do the same job. If everyone were using apps to buy travel, which is what young millennials and Gen Z do, there would be one dominant app. Now the question is, what else does that app need to do for you to use it for other things?
You have to be rewarded for activity inside the app. With Pinduoduo, you can go in and play a game, and then get credit to use in the real world. If you share that game with other people and play it every day, you can get more credit. It’s like Amazon meets Clash of Clans.
Dara Khosrowshahi, at Uber, has been open about how they’re gradually moving in that direction. Grab has tried travel in Southeast Asia. Then you have Chinese companies like the Meituans, and the Alibabas that have Fliggy, where travel is already integrated. And Pinduoduo sells lychees, iPods, and hotel rooms. I think it’s a Western oddity that Amazon isn’t in travel, that Facebook doesn’t sell anything, and that Snapchat does no e-commerce. I think that’s because we’re accustomed to a Western model for older people that is slowly being worn away. And just like QR codes, just like text, as people adopt these technologies, we’re going to become more and more Easternized.
It makes sense that either one of the travel companies will add high-frequency purchases to what they do. We’re one candidate for that. Or a high-frequency app that handles delivery, like Uber, will move into travel. Or one of the e-commerce companies is going to move into travel. It has to end with a few companies that offer a lot of things, and travel is only one of them.
How many super apps would a person realistically use?
One or two. You can look at Asia. There are usually three players that take the pie, usually evenly. Everyone gets one-third.
In 2010, BlackBerry founder Mike Lazaridis defined a super-app as a “closed ecosystem of many apps that people would use every day because they offer such a seamless, integrated, contextualized and efficient experience.” Do you think that definition still holds?
That’s from 2010 — it’s pretty remarkable the vision those guys had. It’s also remarkable that they didn’t carry it out, if they understood this. Habit and functionality are definitely part of it. But, at its core, I think there are two important elements to the super-app definition.
First, I don’t think a super-app can exist without a closed credit ecosystem. The second piece, which is what Pinduoduo does well, and they pioneered it, is earning through engagement. You need to be rewarded for behavior in the app. With Pinduoduo, you can go in and play a game, and then get credit to use in the real world. If you share that game with other people, or you check in and play it every day, you can get more credit. It’s like Amazon meets Clash of Clans. It looks very strange from the outside, but if you think it through, it makes sense: You have all this behavior that people do every day on their phones, and they pay to play games. Well, Pinduoduo decided, “Instead of you giving us money for that, we’ll pay you, but you have to do it.” Pinduoduo has these features where they pay you to scroll for 60 seconds. It doesn’t matter whether you buy or not. But if you stop scrolling, they stop paying.
In the West, the main emphasis has been on discovery … We’ve clearly ended up on the other side of that. We think the only thing that matters is price.
One thing the Asian apps have done is realize that the Western motivation for social behavior—keeping in touch with friends, bragging, and posting—isn’t the only way to do it. People will do it for rebates. They’ll do it for discounts.
Gamification in travel is not a new idea. At least since 2011, old forecasting reports have been calling it a predicted trend. And there are plenty of examples of legacy travel brands trying to use it. In 2013, Expedia ran a 15-week gaming contest in which players took on virtual travel avatars and could earn rewards points by completing tasks that had real-world value. What is different about the way you’re using gamification?
Again, I think this is an East-West issue. Gamification has been around for some time. On Facebook, back around 2006, you could create mini games. That’s how Zynga built a lot of these travel things that became hugely popular. Every couple of years, someone creates some crazy, “Where Have I Been?” app or “Who Am I Traveling With?” app.
The overwhelming focus in the West has been discovery — traveling with other people, boasting about where you’ve been. They’re all about the travel experience. We have definitely gone the other direction. We think the only thing that matters is price — most of the planet’s leisure spending is about price. The reason we’re looking to the East is not because there are no smart people in the West. It’s because we cannot find anyone who has said, “Social behavior for future booking credit” at all.
One of the key pieces is the idea of live ops; these platforms are constantly running sales on virtual goods or events, where items are cheaper and, if you join with other people, you can get things done more easily. That’s a very sensible thing to do in e-commerce, especially if you spend many months trying to shave $200 per person off your Disney trip, which many people have to do.
So we’ve been holding sales every month now. These are the days when you can buy $7 piñatas filled with carrots (Hopper’s virtual currency). Suppliers will take part in that; they’ll discount for 24 hours. Then the question becomes: What can you do in the lead-up to that?
My favorite comparison for this is Shopee, the e-commerce division of Sea, a Southeast Asian gaming company. They have something called Shopee Shake. It’s incredible. Say there’s a weekend sale. At 9 a.m. on Saturday, for instance, a million dollars’ worth of credits to spend in the sale is released. At 9 a.m., you have to open the app and shake your phone as hard as you can for 15 seconds. If you’re there early and you’re shaking harder, you get a slice of the total — $8, $10, $100, who knows. But here’s the twist: If three people get onto this hangout together and tell the app they’re going to shake as a group, everyone gets a multiplier. People wake up, they set alarms, to save $8. This is the Asian mindset. Every part of the phone, whether it’s the camera, the gyroscope, or whatever — like every part of the animal — gets used for engagement. We don’t think this way in the West yet.
I deeply believe that social and engagement, directly exchanged for commerce, like lower prices, is foundational. Nearly every demographic will take part. All we need to do is build those apps.
This interview has been edited and condensed.