Hopper closes $170M funding round, creates new B2B offering with Capital One as first partner

Supported by a massive new $170 million Series F funding round, Hopper is launching a new B2B product known as Hopper Cloud with Capital One as its first partner and is preparing to take on “the big global empires [of travel] as our next stepping stone.”

Those are the words of Hopper co-founder and CEO Fred Lalonde as he explains the company’s ambitious plans for the coming years.

Lalonde says Hopper is a much stronger company than it was pre-pandemic as measured by the amount of money it generates per booking and its gross margin. Of course, the infusion of $170 million helps, too: Capital One led the funding round, with participation from new and existing investors GS Growth, Inovia Capital and Citi Ventures. With this round, the company’s total funding is $423.7 million.

“You’re going to see a lot of initiatives. We’re a bigger company than we were when we shut down already so you’re going to see us innovate around that,” he says.

“You should expect Hopper to look like a global omnichannel company, like the three companies we now compete with, the three global giants, over time.”

As part of its strategy, Hopper will be expanding its offering beyond mobile – first creating a web-based portal that will power Capital One Travel and will be used by future Hopper Cloud customers, and then developing Hopper’s consumer-facing marketplace for the web, which is expected to launch later this year or early next year, a spokesperson says.

Lalonde says he does not want “to do the same thing that everybody else does” as the company looks to take on the big online travel agencies, but he recognizes that, for example, consumers “like the convenience of multi-screen.”

For now the focus is on developing the Hopper Cloud partnership program, which gives Hopper the ability to sell its infrastructure, agency content, financial technology products and data science capabilities to other businesses - and which will certainly be boosted by the news of Capital One’s commitment.

Lalonde says Hopper Cloud is already getting “crazy traction,” and the company expects to announce new Hopper Cloud customers soon, most that are “significantly larger sellers of travel” than Hopper itself.

Capital One

Capital One Travel is the financial company’s existing booking platform for its travel rewards credit card customers – both consumer and small business - to book hotels, flights and car rentals. The portal launched in 2009 and has been powered by CXLoyalty since 2017.

Lalonde says he has been talking to Capital One for several years, and the two companies realized they “share a lot of DNA” about innovation and customer focus. But the details of the collaboration developed during 2020, and as the work progressed, Capital One decided to also lead the latest investment round.

“Hopper and Capital One are co-developing a world-class travel booking offering, and are actively exploring opportunities to meet customer needs,” says Matt Knise, Capital One’s vice president of travel and digital experiences.

The two companies are working closely on engineering and product development for the new portal, which will launch later this year and will include everything that Hopper offers in its marketplace – currently hotels, air, car rentals and homes.

“For us this isn’t just check the box and put this [Capital One Travel powered by Hopper] out there. We are actually trying to understand this business, because we think it is very interesting to use all of our data to make this a better way to buy travel,” Lalonde says.

“I can’t commit to any of the specifics, but the idea of saving money, the idea of being able to decrease anxiety and the risk around the purchase, we’re going to try to deliver all the value propositions that we have for Hopper users and magnify that for the Capital One customer.”

Risk as a service

The concept of reducing anxiety and risk for travelers has paid off for Hopper in the last year as it launched about a dozen fintech products such as price freeze, flight delay protection and refundable bookings for air and hotels.

Lalonde says those ancillary products now account for about two-thirds of Hopper’s revenue – and increase the average Hopper user’s spend by about 15% - and now that revenue opportunity can be shared with other sellers of travel through Hopper Cloud.

“People spend an average of $450 per person when they buy air and hotel and car rental. ... So since 1994 when Travelocity sold the first ticket online, everybody has been battling for a new division of the $450. Google gets bigger, AdWords comes in, spend goes there. Tripadvisor gets invented, Kayak comes out, meta becomes a huge part of the category. But all we’re doing is we’re moving around the $450 based on innovation in the distribution,” he says.

“Now there’s new money in the ecosystem coming from the customer because we’ve invented a product, whether it’s the price freeze, the refundable rates, any of these things that they perceive to be valuable enough to put more money down. ... We can create a revenue stream that doesn’t require the supplier to give something up, that has the customer putting in new money, therefore there is a bigger pie to share. Our thesis for Hopper Cloud is anybody who sells travel on the planet will benefit from adding these services. We’ll see if I’m right.”

Developing as a global OTA

Along with launching Hopper Cloud and continuing to refine its fintech products, the company is continuing to develop its consumer OTA offerings, positioning itself for the travel boom Lalonde says is surely coming.

Hopper added car rentals to its app about six months ago – the category now accounts for about 10% of all bookings – and plans to continue developing that as well as its supply of alternative accommodations.

“We’re spinning up a whole team for that this year, and you’re going to see us do a lot of things including direct contracting there like we do everywhere else,” Lalonde says.

“A Hopper user is twice as likely to book a home than a hotel versus the average because of our demographic - we are 60%-plus millennial and Gen Z ... so we have to get good at it.”

Marketing is also a big part of the strategy for the future. Lalonde says the company will spend more on marketing in March than it ever has before.

Now, as it is “looking at the conglomerates ... the big global empires as our next stepping stone” he acknowledges that those companies have "hundreds of billions of bookings, tens, hundreds of million of dollars of marketing spend, so we are lining ourselves up for that.”

For now the focus will remain on social media marketing, but over time – likely as the web interface develops – Lalonde says Hopper will “go omnichannel over time.”

With the Series F investment, Hopper will also boost its efforts in Asia, Europe and Latin America, regions where the company had paused work due to the pandemic.

Additionally, the pandemic has spurred growth of a different type at Hopper – in customer support.

The company faced a backlash on social media last year as angry customers shared their frustrations about not being able to reach a support person to assist with cancellations, refunds, travel credits and insurance claims.

Since then, Hopper has doubled its number of support agents and plans to continue hiring more as well as building more automated in-app solutions.

“My email and cell phone have been leaked, and I’ve gotten thousands and thousands of calls and texts from angry customers, rightfully so. Every single one of them we handle,” he says.

“As far as I know everyone is getting what they should have gotten. And if somebody reading this hasn’t call me – it’s not hard to find my number and we’ll get back to you one way or another.”