It’s the market few saw coming, says co-founder Dakota Smith.
With five partnerships with banks and credit cards in place in the United States, Brazil, Australia, Japan and South Korea, Hopper is doubling down on growing HTS (Hopper Technology Solutions) as the next generation travel platform that will help people to travel “whether they want to buy from [online travel agencies], supplier direct or credit cards and banks.”
Speaking to WiT from Paris, president and co-founder Dakota Smith said other than the Summer Olympics, the most exciting thing happening in his world right now is the growth of HTS, which now accounts for 66% of total revenues for Hopper.
“It was zero in August 2021,” he said.
It will also be the sole deliverer of international revenues, with Hopper having made its decision to limit the scope of its consumer app to North America.
“We have shifted resources to HTS, we are not investing in marketing budgets internationally for the Hopper app, our international revenue path is HTS.”
It has identified up to 30 markets for similar partnerships with financial institutions across the world. “This path has a long sales cycle and we’ve been cooking deals since last summer and it’s only now that we can announce some of the partnerships,” said Smith.
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Clearly determined to put its troubles behind it, including its much-publicized breakup with Expedia last year, Hopper is laser focused on powering the partners it has signed.
Other than Capital One in the United States, it announced this week a deal with Tripadvisor to aid that company in providing hotel bookings from its app. Outside the U.S., it is partnering with Nubank Ultravioleta, the largest fintech bank in Latin America, to launch NuViagens, to provide Nubank’s 100 million customers with the ability to book air tickets, hotels, and access travel-related financial technology.
In South Korea, it will develop a travel loyalty portal for Lotte Card cardholders, and the new feature, integrated into the “Digi-LOCA” app, will offer services such as flights, accommodation and car rentals.
In Japan, it has sealed an agreement with Sumitomo Mitsui Card Co. (SMCC), the credit card company of SMBC Group and the largest credit card issuer in Japan, to create a travel loyalty portal for SMCC customers. The booking portal, slated to launch next year, will allow cardholders and reward members to book flights, accommodations and car rentals with added flexibility and options.
In Australia, the Commonwealth Bank has launched a new travel booking service available via the CommBank app, powered by HTS, which allows more than six million eligible customers to search, book and pay for flights and hotels.
“The global nature of this business is really exciting, winning partnerships as diverse as this is thrilling – we had to go through really in-depth processes to be selected as the tech provider – and it shows we have product-market fit,” said Smith.
Why do you think you are winning?
“If it’s HTS vs. Booking Holdings, it can only be one thing – our tech stack, which is superior to theirs. No one believes we are larger than Booking, no one believes we have more sales than them, no one believes we have a longer history – but when it comes to B2B contracts, we have a modern tech stack that’s digitally integrated with rewards and loyalty, and that’s what these companies want.
“We started building HTS in 2021 as a stack of micro services. It’s not monolithic, and our tech makes it easier for us to be flexible, so we can adapt to different local market conditions.”
Asked if price had a part to play in winning the deals, Smith said the commercial arrangement was based on transactions and profit share. “We make nothing when they [partners] make nothing.”
He said it was the success of the Capital One partnership that gave it the confidence to “build up this new space in travel.” In 2022, Hopper secured a $96 million follow-on investment from Capital One, which previously led its Series F round in March of 2021.
Both teamed up to launch Capital One Travel, a credit card which offered elevated earn on travel bookings and features such as price alerts, price drop protection, and the ability to cancel your flight for any reason.
“By the first year, the Capital One Travel card was voted best credit card by USA Today,” said Smith. “This is a big deal where the incumbents have always been Chase and American Express.”
Its local approach to unique markets such as Japan and Korea
It will be interesting to see if the American success story can be replicated in other markets. Smith said each partnership comes with customization to meet local market conditions. “For example, Americans love to spend on travel, and they earn and burn on travel, so the value proposition there is travel rewards and benefits.
“In Japan, we look at how Japanese people travel, and trains are more important. Japan also has a very established loyalty market; people like to earn and spend points. People there also travel the most in the world, and credit cards are becoming more and more accepted, so there’s a lot of room to create points.
“We also know Japanese like to book in person or on phone, and if online, more on desktop. We are working on delivering a more modern mobile experience for the next generation of travelers. We will be deeply integrating with V-Points which is SMBC’s rewards program.
“In Brazil, there is less purchasing power, so the value proposition is not just earning points on travel but facilitating credit as well – we have an eight-month installment, interest-free scheme so people can take the trip and pay over time.”
To sell travel at the scale of billions, you need best tech, best marketing budget and access to tens and millions of customers. This industry doesn’t work unless you have scale.
Dakota Smith – Hopper
South Korea is another market in Asia that is peculiarly local and normally tough to crack for Western travel brands, but Smith said he has every confidence that the partnerships in both North Asian markets will do well.
Clearly, the success of each partnership is also contingent on how much each partner is willing to spend on marketing and customer acquisition. You could argue that in the U.S., Capital One has a vested interest in spending given its investment in Hopper.
Speaking to industry watchers in Seoul, the observation is that the partnership with Lotte Card “will not be a big deal unless Lotte Card spends a big amount of budget on it,” said one observer. “As we know, margins of air ticket sales are very tight, and lots of Korean travel players are competing on price. Credit card companies are also spending with Korean travel agencies.”
The differentiator in the Hopper partnership is its other fintech services, such as price freeze and “cancel for any reason,” which are included as part of the offerings. There is currently consumer weariness in Korea over cancellation fees by airlines.
Indeed, Smith said that HTS’ fintech services, in particular its “cancel for any reason” feature, are proving popular with airlines. It currently has these partnerships in place with Air Canada, Flair, the low-cost carrier in Canada, as well as AirAsia MOVE, AirAsia’s super app, and it expects to have 10 airlines live by the end of the year, said Smith.
Up to 30 markets identified – “not everyone can sell travel”
Hopper’s data shows up to 30 markets that could be interesting for the credit card model. “Clearly they have to be high income countries with big credit card markets, and we have identified them to be in Asia, Europe, Canada, Mexico and some countries in the Middle East.”
Smith, however, believes that even as travel technology companies such as itself, Expedia and Booking roll out B2B technology to power anyone to sell travel, “not everyone can sell travel.”
“To sell travel at the scale of billions, you need best tech, best marketing budget and access to tens and millions of customers. This industry doesn’t work unless you have scale. Who has scale in travel? Suppliers – airlines and hotels, and their tech will get better and better, in particular, hotels; OTAs – they have big marketing budgets, comparatively good tech and tens and millions of customers and the one that few saw coming – credit cards.
“Credit cards have access to hundreds of millions of customers and other than credit facilities, the thing their customers love most is travel, to earn and burn, and if we can offer a digitally compelling solution, credit cards will become a force of nature.”
And he doesn’t see credit cards going away anytime soon even as we see markets with low credit card penetration such as India and Indonesia swing toward wallets and other forms of payments such as debit cards.
“Let’s face it, in your 20s, you cannot have a credit card, but by 35, you probably can. That’s the business model with the neo banks – they sign up people for wallets and debit cards and as consumer purchasing power increases, they will give them credit cards. Their plan is not to keep them on debit cards forever.
“Wallets will be interconnected with the idea of credit. Financial institutions make money on credit. We are excited because we have created a new space, and we believe it can be very big. The number one category for discretionary spending is travel and experiences in the real world are what people want.”
*This story originally appeared in WiT.