Key Takeaway
While price predictors and flight-booking apps are certainly not new, Montreal-based Hopper has raised nearly $84M for its AI-powered prediction engine that can identify flight prices up to a year in advance, with over 95% accuracy. Hopper’s AI takes several different data points into account when recommending the best possible locations, flight paths and timing for a user’s desired trip.
To buy or not to buy
Move over, Kayak and Expedia. Hopper’s advanced predictive model indicates precisely the right time to buy airline tickets, the right dates to travel and potentially slightly altered destinations based on smart data. While this concept in itself is not new, Hopper offers one of the most powerful prediction engines on the market.
“Think of an e-commerce site that tells you 70% of the time, ‘Don’t buy,’?” says Sophie Forest, a partner at Brightspark Ventures, the startup’s first investor in Forbes. “Hopper is that anomaly.”
Targeted mainly toward those booking leisure travel, Hopper’s strategy is focused on push notifications that alert users when it’s a good time to buy their chosen flight. However, instead of simply looking at flight prices, Hopper knows details about the sort of experience a customer is looking for and can help them discover new recommended destinations or trips.
Last year, they made $15M in revenue through this tactic, and Hopper was the 4th most downloaded app in the US behind Uber, Lyft and Airbnb. According to Hopper, customers save an average of $50 per ticket. Competitor Kayak can predict flight prices only seven days in advance vs Hopper’s 365, and others like Google Flights cannot predict when better deals may be coming.
An AI-driven flight booking data center
Founder and CEO Fred Lalonde has turned the Montreal-based Hopper office into a fully fledged data center filled with flight price records and booking data.
“What we’re doing in the backend,” he told Betakit, “is we’re recreating everything. All the notifications you’ll receive for that trip will be different…This basically lets you tell the bunny exactly what you want, and now the bunny isn’t just telling you how to save money, it’s telling you how to save money on your ideal trip.”
“We use hundreds and hundreds and hundreds of computers to do what you’re trying to do in fifteen minutes before making dinner,” Lalonde said.
The AI considers data points beyond flight prices to make its predictions. Based on large amounts of user data its been fed over time, the app knows that when a user searches for a particular location, there’s often a whole host of things they’re really looking to experience that may open them up to options beyond that particular destination.
According to Forbes, “The AI knows, for example, that Hopper users watching a flight from New York to Hawaii are more likely to end up purchasing a flight to the Caribbean. Over time, Lalonde expects AI to generate 75% of purchases.”
Hopper launches Secret Fares
This week, the company launched a new product: Secret Fares. It will offer discounted fares users won’t be able to find anywhere else. These deals – offered exclusively via push notifications – will be up to 35% cheaper than fares customers can find anywhere else.
Thanks to Hopper’s AI-driven advanced predictions, they have in fact opened a new channel through which airlines can reach customers with more exclusive or attractive offers further in advance. As well, Hopper’s rates don’t appear on aggregators like Kayak and Expedia, so they avoid causing further fare wars.
According to the New York Times, “airlines are interested in partnering with the company because the app maintains sole access to the rates, and if an airline were to offer these types of discounts on the open web, they would typically result in a fare war, as competitors can spot the discount and match the price.”
How do these pricing predictions work? According to Lalonde, “You need accurate forecasting for people to engage with you meaningfully on the phone…We have a historic archive that has 7 trillion prices in it that we use to create our forecasting accuracy and people trust it.”
In an industry where price margins remain razor thin, it was a big wakeup call to airlines themselves when flight bookers like Expedia and Bookings.com entered the scene. Now those incumbents are facing steep competition, as newcomers like Hopper are leveraging new technology and years of data to push travel even further into the control of the consumer.
For more insights, download an Outside Insight competitive report on the US airline industry here.