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How fintech can drive the travel industry's recovery

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Frederic Lalonde, Hopper CEO and Co-Founder, joins Yahoo Finance Live to discuss the bounce back in travel, Hopper’s booming growth, and ways travel fintech aids in bettering travel for customers.

Video Transcript

[MUSIC PLAYING]

ALEXIS CHRISTOFOROUS: The beaten-down travel industry appeared to be on the upswing this summer. But a surge in new COVID cases could threaten the bounce-back. Joining me now is Frederic Lalonde, CEO and co-founder of the travel app start-up, Hopper.

Frederic, great to see you. And I was looking at-- at Hopper's financials and, wow, I mean, revenue already up 100% versus your pre-pandemic quarter. I'm curious what impact this new wave of COVID is having on your business right now.

FREDERIC LALONDE: Yep, that's interesting. We-- definitely the Delta variant is concerning. There's some areas like Florida, where we're seeing high case loads. But travel itself globally and at Hopper is really in what we call a super cycle, so there's a lot of pent-up demand.

Consumer saving rates are as high as we've ever seen them, and people are frustrated. They're booking travel. So regardless of the fact that we're seeing some disruption in some of these markets, we're basically continuing to grow. We've had some of our strongest days ever actually this week in terms of travel sales and booking.

One thing that we are noticing, though, is that there is a surge in demand for our disruption protection products. So Hopper sells travel, but we are really fueled by all of our financial products. And one of them is a product that prevents disruption.

So if you're disrupted, we basically pay for a new flight for you. And the purchase of our disruption and rebooking products is up 50% since the beginning of the year. So people are traveling, but they're also very nervous.

ALEXIS CHRISTOFOROUS: So what you're-- you're offering folks is sort of this travel insurance, if you will, through your fintech products. Talk to us about how much that typically costs because it sounds like people are willing to pay a bit of a premium to protect their travel.

FREDERIC LALONDE: Yep, yeah. What we do at Hopper and this is why we've been so successful, we actually doubled our revenue during the pandemic on the same kind of demand slump as our competitors. But we have a massive big data stack and AI technology that dynamically prices the risk of the future. So if you think of when Hopper was started, we forecasted future airfare.

Today, we use that same data advantage and technology to basically insure people against all sorts of things. One of our most popular products is what we call price freeze, where we freeze the price-- a low price today. And if the price goes up, you actually don't pay the difference.

We do, but we do this for changeability and disruption. And so the answer is, it really depends if you're booking an $89 flight or a $2,000 flight, it's usually a nominal amount, anywhere between 10% to 15%. But at the end of the day, what we've seen during the period we're in now, but even the bulk of the pandemic, the first and second waves, the more disruption there is, the more people to lay on-- tend to lay on these financial products as they're purchasing travel.

ALEXIS CHRISTOFOROUS: Yeah, definitely an interesting consumer switch or habit, if you will, that continues to be growing throughout the pandemic. I want to get to your recent raise, $175 million. That's no chump change there, Frederic. In your latest round of funding, I believe you've raised something like $600 million. Is that correct?

FREDERIC LALONDE: Yep. Just a bit short of that, about $580.

ALEXIS CHRISTOFOROUS: Wow. And so now Hopper is valued at-- at $3 and 1/2 billion. Talk to us about how you're going to use the latest funds that you were able to raise.

FREDERIC LALONDE: Yeah. So the-- the focus that we have right now is completely on growth. On one side, we have what we refer to as the marketplace. But it's basically the Hopper app that everybody has used. And so we have over 60 million downloads. We're easily the largest travel app in North America.

Some of our competitors globally are larger. But in terms of mobile installs, we tend to be the biggest ones. And as we continue to grow, we're seeing demand.

And we also announced a raise at the beginning of this year. So we have quite a bit of-- of cash on hand. One of our focuses for this is international expansion. So we're getting ahead of the border reopenings.

To be clear, I think we have at least another year of disruption with COVID. But gradually as the vaccines roll out, we're seeing some stability in international travel. So we've opened material presence in Latin America, Europe, and we're very interested in Asia, amongst other places.

The other part is a whole lot of category expansion. So you-- you're going to see us get into homes, activities. Basically everything that a traveler would want to purchase, we're going to try to offer in the app in the Hopper way.

The other half of our business now is something we launched actually at the beginning of the year with the Capital One funding announcement, is what we call Hopper Cloud. So our fintech products have been so successful in our marketplace that we've started to make them available as a cloud service. You can think of Amazon's AWS as a comparable. So other companies that sell travel, that have travel reward programs, are using our financial products to increase their revenue and help their customer experience. And we're offering that as a B2B offering.

Both parts of our business, the-- the growth is on fire. We're seeing high triple-digits everywhere. The business is basically doubling every quarter, so it made a lot of sense to bring on investors to help us support that growth.

ALEXIS CHRISTOFOROUS: And one of the things I know you're doing to go along with your B2B efforts is you are white labeling some of your products, working with Capital One. You recently had a deal with Amadeus. I guess that brings in-- is that going to bring in car rentals to the platform?

FREDERIC LALONDE: So we have car rentals in the app today on iOS. And it's rolling out in Android. And, yes, you're going to see us bring basically every important travel category into the app. And the-- the cloud component really is two offerings.

The reason people come to it is because of the financial services, the ability to offer our price freeze. And one thing that's important is we take on the financial risk. As I was explaining, we pay out the difference. We've gotten incredibly good at pricing risk algorithmically in travel, and it just allows other companies to benefit from that.

And there are some of our customers on the cloud side that don't sell travel, and they need fulfillment. They need the-- the hotel, the car, the flight, and we actually have a really good marketplace with exceptionally low travel prices. So overall the-- the offering is becoming more and more attractive.

ALEXIS CHRISTOFOROUS: All right. Frederic Lalonde, CEO and co-founder of Hopper. Thanks for spending time with us today. We appreciate it.