Montreal-based Hopper is expanding its product offerings as demand for its travel booking services reaches record levels. However, the big boss of the online travel agency realizes that the current fad is unsustainable.
Posted yesterday at 5:00 am
“It’s crazy right now,” says Hopper founder and CEO Frédéric Lalonde. “Every week is a record. »
People want to travel after two years of the pandemic, and it shows throughout the industry.
Hopper has doubled his income in six months, says Frédéric Lalonde. “Booking has just posted its best quarter since it was founded in 1997 and eDreams, the European Expedia, has just announced its best results in 10 years,” he adds.
“At the moment, we do not believe that the economic context will dampen the enthusiasm of travelers. But it is absolutely certain that next year there will be a slowdown”, believes Frédéric Lalonde.
“It is impossible for what is happening at this moment to be sustained, because it has been two years without traveling, it is the verification that the government can prevent us from traveling, something that nobody would have believed possible. But it’s also because governments have handed out huge amounts of money to consumers during the pandemic. People accumulated little debt on their credit cards, so it created a supercycle, a freak wave. »
Rising interest rates make mortgages and other debt more expensive, stock market volatility puts pressure on retirement savings, and inflation inflates the value of consumer goods.
“There is probably a recession coming. This cannot continue like this”, says Frédéric Lalonde, speaking of the demand for reservations of flights, hotels and rental vehicles.
Demand and fuel costs combined with limited capacity are putting pressure on airline ticket prices and hotel and rental car rates. That’s why, according to Hopper, the price of travel this summer is skyrocketing over previous years.
Management adds that high prices, frequent delays and continued uncertainty are exacerbating consumer anxiety, and that Hopper-designed financial products are alleviating that anxiety.
Hopper has been testing some new financial products since the beginning of the year and is now ready to officially launch them.
Frédéric Lalonde’s favorite novelty is the “permission for any reason” product. This product allows you to check out during or after check-in and reserve a room in a new hotel of the same star category at no additional cost.
“You can arrive at the hotel and realize that there is a jackhammer next to your room,” says Frédéric Lalonde. Dissatisfaction can also be related to the cleaning service that is not up to par, or simply to the fact that the client expected to have a sea view.
We are the only ones on the planet that offer this.
Offering a product like this is easy, as the CEO himself admits. Not losing money offering it is something else. “It’s hard,” he admits, explaining that the cost is calculated dynamically.
“When someone books a room at the Ritz-Carlton and decides they don’t want to go there, we have to pay for the new reservation in full. There is no risk assumed by the provider. [hôtel ou transporteur aérien]. You have to be extremely good at calculating risk. »
With each transaction, the algorithms calculate at what price to sell the product based on the risk. If a customer buys a plane ticket with connection insurance and it is known that a hurricane is on the way, the price will go up.
In general, Frédéric Lalonde estimates that the cost always fluctuates between 6 and 15% of the price of the purchased travel product. “If you buy a plane ticket for $100, it will cost you an average of $6 to $15. »
In a context where demand is “exploding” and “everything is full everywhere”, the CEO finds it hard to hide his excitement at the success and potential popularity of this new product.
Cancellation and freezing
Hopper now offers the ability, now available for flights, to instantly cancel a stay, for any reason, if you haven’t already checked in, and get your room cost refunded at no charge.
Another novelty, the products that freeze the prices of flights are now available for car rental for a period of up to 21 days. If the cost goes up, Hopper pays the difference up to $100, and if the cost goes down, the customer pays the lower price.
“It’s important because it means it’s possible to freeze the price of almost anything that’s available on the Hopper app,” says Frédéric Lalonde.
Hopper was also quick to realize that there are plenty of reasons to book directly with your airline or hotel chain, if only because of the loyalty programs.
Therefore, Hopper’s financial products are now offered to users, regardless of where they book.
If you book directly through Air Canada or any other airline, you can now add flex products that were previously only available if you were a Hopper customer.
“We would like everyone to buy on our platform, but the reality is that this is not how the industry works. Being able to add these financial products to any reservation allows us to cross a new frontier. »
Hopper, whose worth was estimated at $5 billion just six months ago, does not disclose his earnings. The CEO, however, maintains that they are now 30 times higher than in 2019 before the pandemic, in particular due to the incorporation of the different financial products developed.
Hopper’s gross booking value this year is expected to be between $4 billion and $5 billion.
Hopper counts among his investors Investissement Québec, the Caisse de Depot et Placement du Québec, OMERS (Ontario Municipal Employees Retirement Fund), Brookfield and Inovia.
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