Finding Product-Market Fit with Hopper’s CEO Fred Lalonde

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By Jessica Galang
April 21, 2021

As the head of a company in the travel industry, Hopper CEO Fred Lalonde was in the eye of a storm spurred by the COVID-19 pandemic in 2020 — cancelled flights, closing borders and a vaccine that could take years to develop. 

“I thought we were dead,” says Lalonde, who had to lay off hundreds of employees and field thousands of angry phone calls and texts from customers seeking refunds and an explanation for delays.

But, for the customers that were still travelling for important reasons, the company discovered a new, stable revenue line through features it had been working on for years: making non-refundable ticket prices refundable, allowing customers to freeze flight prices, or allowing them to pay a fee so if Hopper’s pricing prediction wasn’t accurate, they would get money back. For the latter service, Lalonde says it helped the business shift the risk away from the customer to its balance sheet. 

Today, Lalonde says these financial services-type features are 70% of its revenue. “It was more than half even before the pandemic and then the pandemic happened,” says Lalonde. “We ended up doing really really well because as people booked and canceled, all this chaos created a stable revenue line that wasn't disrupted by cancellations.” 

“We only care about what our customers think and say, and then we're constantly adapting our strategy to what we learn from the customers.”

Now referring to itself as more of a fintech company, Hopper recently announced a US$170 million growth equity round led by credit card company Capital One. Through the investment, Hopper is powering Capital One Travel through its Hopper Cloud B2B service offering. Hopper will power Capital One’s travel booking app for customers, providing “risk-as-a-service” with all security and liability built in by Hopper. 


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“Anybody who's using Hopper Cloud for their reward and loyalty programs can literally construct a program where it is more advantageous to use their credit card than any other one on the market,” he says. 

Hopper is an example of a company that’s no stranger to iterating quickly, so for this first edition of the SAAS NORTH NOW newsletter, we talked to Lalonde about finding product-market fit, making revenue and dealing with the world-changing pandemic. 

Stumbling on product-market fit

In 2014, Hopper was focused on general travel discovery online, until a 2018 New York Times wrote about an online tool that analyzed which day of the week is best to book for various routes, which Hopper thought could be helpful to journalists. Hopper ended up getting millions of users and a product-market fit completely different than their initial proposition.

 “We weren't planning to be an online travel agency, that was not part of the founding thesis or any of the money we raised, and it just took off like crazy,” Lalonde says. “The customers gave us a strong signal that we had to do the forecasting component, even though it's been tried and people couldn't build a business out of it. We found that the anxiety around when to buy a ticket was just universal.”

At the same time, the company was cornering the mobile market at a time when mobile travel booking was only about 15% of all bookings, says Lalonde.

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“This is in a category where the incumbents sold $100 billion in travel that have been consolidated for 10 years, so it was a very gnarly thing to try out of the gate,” says Lalonde. He called his former colleagues at Expedia, who warned him he was closing out 90% of the market. 

“Of course I went and did the exact opposite of what everybody said,” says Lalonde, who said he wanted to do the “Wayne Gretzky thing” and shoot to where the puck is going. 

Eventually, Hopper grew to 25 million users and became the biggest travel app in North America. 

“We only care about what our customers think and say, and then we're constantly adapting our strategy to what we learn from the customers.”


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Reaching cloud nine

Despite amassing millions of users, making money was still a challenge. While they were selling air travel as a low-margin product, with all the consolidation of the airlines, Hopper wasn’t doing anything new or interesting even if users trusted Hopper as a planning tool, says Lalonde.

“In a world where travel is booming again, but corporate travel is depressed, people are going to be struggling to get the unit economics they had before the pandemic.”

As the team thought about the business, they thought about the users who haven’t benefited from their planning tool. “We forecast accurately 95% of the time, but what about the other 5% of people, why are they losing?” says Lalonde. “We started thinking along the lines of, what happens if everybody pitched in five bucks and when we got the forecast wrong we just paid out, like we're all in this together?”

That thinking was the genesis of their Hopper Cloud product they launched with Capital One as an anchor partner, allowing Hopper to handle the risk and Capital One to more easily provide peace of mind to customers. With the pandemic, a feature accounting for risk was more important than ever.

At the same time, the company shifted its thinking to a world where a vaccine was years away. They launched a car rental feature, anticipating people would still want to go on vacation, but couldn’t fly. They also launched disruption protection, which allows travelers to instantly rebook a flight on any airline at no additional cost if their flight is cancelled or significantly delayed. 

“Those two products have the highest growth rates in the company, and I mean quadruple digits, because those two things are very true and very obvious,” says Lalonde. 

Over a year after the pandemic, Hopper has hired back 400 people, according to the Globe and Mail, and appears to be on its way to become a full-fledged financial services company.

“In a world where travel is booming again, but corporate travel is depressed, people are going to be struggling to get the unit economics they had before the pandemic,” says Lalonde. “So the idea of a new revenue stream is really appealing.”