Canadian online travel upstart Hopper takes on Airbnb

Hopper Inc.’s drive to build a giant global online travel agency built on artificial intelligence is putting it in Airbnb Inc.’s sights.

The Montreal company, one of Canada’s fastest-growing and most heavily financed tech companies, on Thursday added shortterm home rentals to its app-based offering, which also features flight, hotel and automobile bookings, targeting 25- to 35year-old leisure travellers. Hopper also sells financial products including an offer allowing customers to cancel bookings for any reason.

Chief strategy officer Dakota Smith said Hopper sells US$1-billion worth of hotel rooms a year to customers, but “given that half of the lodging spend they make while travelling goes to alternative accommodation … we know there is another one billion” that Hopper’s customers are spending elsewhere on accommodation. “We want to capture that.” Hopper said it is launching the homes business with more than two million properties globally, many of which are managed by large groups that have consolidated the supply-side of the online peer-to-peer travel accommodation space.

“For us to not have homes in this ecosystem was a big gap,” said Susan Ho, Hopper’s head of homes.

Hopper has launched into the market with what it acknowledges is a “minimum viable product.”

But Hopper claimed it would bring more transparency, flexibility and the lowest prices to the US$100-billion-plus shortterm home rentals category, including better refund and cancellation policies than rivals such as Airbnb Inc. and Expedia Group Inc.-owned Vrbo. Hopper will allow customers, for a fee, to cancel up to 24 hours before their trips for full reimbursement, and unlike rivals, Hopper says it will offer a low-price guarantee by spring. “We’re very good at pricing and figuring out what our customer want,” Ms. Ho said.

Jamie Lane, vice-president of research with AirDNA, a Denver-based market research firm in the short-term rental market, said Hopper is entering “a very hot industry” that saw a 22.5-per-cent increase in nights stayed in 2021 over 2020 and 2.7 per cent higher than the prepandemic year of 2019.

He anticipated Hopper would compete more with Vrbo, whose supply comes more from larger property managers than Airbnb. “Do I think Hopper will eat into Airbnb and Vrbo? Probably not.”

But he added that give how fast the industry is growing, Hopper “absolutely will be successful,” as others that have entered the short-term rental space have been.

Hopper has had a dramatic turnaround since the start of the pandemic, which chief executive Fred Lalonde has called an “extinction-level event for the company.” Hopper had been a darling of the travel press for years with its innovative mobile app. Hopper leverages vast amounts of price-quote data obtained from travel booking systems like Sabre, applying AI to predict the best times to book flights. One of its signature features is the fact it frequently messages its millions of monthly users not to buy, but wait until the price drops.

Hopper added hotel bookings in 2017 followed by car rentals, but revenue growth was modest, reaching $17-million in 2019. That year its fortunes began to soar when it started adding ancillary financial services-like products, leveraging its access to vast data sets from price-searching travellers. Travellers could now pay extra to freeze a flight price for several days, buy the right to cancel for any reason for full credit, rebook a missed connection for no extra fee or change a ticket to a different day without forfeiting the full ticket value. Hopper figured out how to price the offerings to turn them into high-margin products, based on algorithms and probabilities gleaned from its data – plus, it has acknowledged, trial and error.

Everything began to click, and in February, 2020, monthly revenue was up by 450 per cent year-over-year, driven largely by the financial products. The company believed it would surpass US$100-million revenue that year. Then the pandemic hit. Until airlines agreed to refund tickets for cancelled flights, Hopper faced the possibility claims on its financial products would wipe it out. It laid off or furloughed half the staff – about 250 people – and took months to sort through refund requests.

But Hopper also managed to secure more than US$400-million across three separate financings in 2020 and 2021, reaching a valuation of US$3.5-billion. Hopper also began partnering with consumer-facing businesses to power their travel-booking services, starting last year with Capital One Financial Corp., an investor.

Hopper’s shift into financial services helped as consumers began travelling again. Revenues, the company said, doubled in 2020 and increased by 300-plus per cent in 2021, when Hopper was the most downloaded travel-booking app in the United States, according to Apptopia; it has now been downloaded 70 million times.

Hopper’s revenues are now running at an estimated US$200-million-plus pace annually and it has nearly 1,900 employees.

Hopper claimed it would bring more transparency, flexibility and the lowest prices to the US$100-billion-plus short-term home rentals category.