Predicting Airfare Is a $750 Million Business
(Bloomberg) -- Trying to predict the price of plane tickets has become something of a parlor game for companies looking to stand out in the online travel business. Microsoft Corp. gave it a shot with Bing Travel before abandoning the feature several years ago. Kayak offers its own buying advice tool, with a warning that draws comparisons to the reliability of a weather forecast.
Today’s emerging contestant in airfare prognostication is Hopper Inc. The travel-booking startup said its predictions are 95 percent accurate. Travelers -- and investors -- are buying in. A new investment values the business at about $750 million, said a person familiar with the transaction, who asked not to be identified because the terms are private.
Hopper said the new round of funding totaled $100 million and was led by the venture capital arm of the Ontario Municipal Employees Retirement System. It puts the startup in a small club of travel apps, which also includes Hotel Tonight Inc., that have raised significant venture capital instead of selling themselves to one of the industry’s giants: Booking Holdings Inc., Expedia Group Inc. or Ctrip.com International Ltd.
Frederic Lalonde, a former vice president at Expedia, left the company in 2006 and started Hopper the next year. The Montreal-based venture became a star of Canada’s technology scene and earned backing from local VCs, pension funds and the state-owned development bank BDC. Hopper has raised $184 million since its founding more than a decade ago.
Hopper looks at millions of historical flight prices to estimate how costs will change for certain destinations over time. Using that info, it tells customers exactly when to book to ensure they get the best deal.
The service is only available as a mobile app, a major departure for an industry that still gets the majority of travel-booking revenue from people on computers. The app has been downloaded more than 30 million times; 90 percent of sales come from notifications to users saying a flight they’re monitoring is going for a good price, the company said.
Hopper is tiny compared with Booking and Expedia. Customers have booked less than $1 billion through Hopper since August 2015, when it added the ability to buy flights through the app. Expedia and Booking each booked more than $80 billion last year alone.
To keep their advantage over the last couple decades, Expedia, Booking and China’s Ctrip tend to buy successful startups before they get too big to challenge them. But executives at Booking and Expedia have recently said travel upstarts are overpriced due to a surplus of venture capital in the market.
Lalonde, the Hopper founder and chief executive officer, said he’s focused on hiring and expansion to non-English-speaking countries. He said an eventual goal is to go public, although the company doesn’t have a timeline for that.
“Right now the focus is on growth,” Lalonde wrote in an email. “We want to build the largest, global, mobile travel marketplace in the world. Going public is a logical outcome of that.”
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