Geektime spoke with Co-Founder and CEO Frederic Lalonde to discuss the company’s 2017 plans and forecasts
Hopper, an airfare prediction app, has closed a Series C funding round worth $61.7 million this week. With this, the Montreal- and Cambridge-based company founded in 2007 has raised $82 million to date.
“Mobile commerce has reached the tipping point globally,” CEO and Co-Founder Frederic Lalonde said in a statement. “We have growth initiatives slated for Q1 2017 in over 20 countries in Latin America, Europe and Asia.”
Major Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) led the round, which also included multiple previous investors, such as Brightspark Ventures, Accomplice, OMERS Ventures, Investissement Québec, and BDC Capital IT Venture Fund.
The company’s new hires will be concentrated between expanding the Montreal-based support team and doubling their number of engineers. It’s also looking to partner with new carriers, including European budget airlines RyanAir and EasyJet.
The company has increased its user base substantially, to 10 million users on both iOS and Android, and has a monthly installation count of 1 million. The flights it sells are worth over $1 million on a daily basis. Originally established to help travelers plan out vacations based on activities they’d like, the company quickly transitioned from that aspect of trip planning to finding cheaper plane tickets for those travelers: “We basically stumbled upon the new focus by accident,” Co-Founder and CTO Joost Ouwerkerk told BostInno last year.
“We’re a data science company,” Lalonde told Geektime in an email, and has high confidence in its ability to produce results: “In 95% of cases, we do save users money or at least the same price as their first search on Hopper.” In the remaining instances where the prediction is off, he says, “We encourage users to reach out to us so we can look into it,” as, “This helps us improve our forecasts and also rectify situations where we missed the mark.”
He adds that users save on average $150 annually when they use the app to manage their bookings. Hopper has enjoyed a positive reception since it began ramping up its operations, taking the Apple’s App Store Best of 2015 Award for travel, the Google Play Award for Standout Startup of 2016, and the 2016 Webby Award for Best Travel App.
“We use our historical data to create trip-specific pricing forecasts up to a year in advance of departure based on current and historical yield trends, as well as pricing volatility.” Users will begin looking at prices about three months before departure, and this is about a month more than other travelers. “The earlier a user sets up a ‘trip watch’,” according to Lalonde, “the greater their savings will be in the app.”
It can be tricky to account for sudden swings, as airfares can change over a matter of hours. As the company’s Chief Data Scientist Patrick Surry puts it, “If we’re too conservative and recommend that you buy too early, we risk missing out on a good deal later, but if we’re too optimistic we might wait too long looking for a price that will never occur.”
That said, because airlines generally assess customer behavior in terms of last-minute travelers who will pay more for a ticket and the majority of people who book earlier are on a more restricted budget, advance purchase patterns can be picked out months before the departure date. The data set for these calculations is collected across 8 billion airfare price quotes per day, and an archive of 5.2 trillion entries going back three years or more.
But, what about sudden changes in prices caused by political upheaval? The past two years have not been kind to tourism in Turkey and Egypt, for example, due to political violence that drove foreign visitors away and forced operators to slash prices: or, say, Brexit’s effect on the GBP-EUR exchange rate and airline regulations. The single-most watched global destination outside of the US for 2017, Hopper predicts, is in fact London.
“Prices are normally unaffected in the short term,” Lalonde explained, but, “This type of unforeseen event often has an immediate impact on search behavior, with an initial spike as many people try to assess what impact it has on their travel plans, typically followed by a longer-term weakening of demand (for a negative event).” In the long term, prices and capacity drop, which they’ve observed in international travel from the US in 2016.
With respect to the aforementioned Brexit event, which threw the EU into turmoil as the UK voted to leave the supranational body and its attendant customs and financial standards, Hopper was able to calculate how the fallout from this event could impact tourists. “Europe and the UK has had a lot of negative coverage in the last year (refugee crisis, terror attacks, Greek crisis, etc.),” according to Surry, and so, “Brexit was likely the final straw and airlines are likely concerned that uncertainty and trepidation will reduce overall demand.”
In the long run, once the terms of Brexit are decided, “Additional border controls would make London less attractive as a European transit hub, which along with a cheaper pound easing local operating costs, could lead to lower fares to the UK in the medium term.”
Hopper also outlined for Geektime what destinations travelers can expect to see greater savings by using Hopper – more than 30% – for both US domestic and international flights. In the case of the former, some of the biggest savings will be for Washington, D.C. (50%), Baltimore (49%), Denver (42%), and Savannah and Houston (39%). Internationally, the Caribbean looks the most attractive, covering Costa Rica (49%), Barbados (45%), and Trinidad and Tobago (42%).