Fred Lalonde, founder and CEO of Hopper, poses for a photograph at their company offices in Montreal on Monday, October 1, 2018.Dario Ayala/The Globe and Mail
One of Canada’s largest private technology companies, the online travel services provider Hopper Inc., has cut 30 per cent of its full-time staff in an effort to reach profitability.
Fred Lalonde, the chief executive of the Montreal-based company, said in an interview that the cuts, announced internally on Tuesday, were mainly to “experimental” products and services Hopper hadn’t launched yet, and that none of its offerings in market would be affected. The company will pull back on marketing in some territories, including in Asia, where its eponymous consumer travel-booking app hasn’t yet gained many customers. But it is continuing to invest in fast-growing areas of its business, including lodging offerings, Mr. Lalonde said.
The layoffs, he said, had nothing to do with a possible slowdown in travel prompted by economic uncertainty. Other online travel companies, including Expedia and TripAdvisor, have cited this as a reason for cutting jobs this year.
Rather, Mr. Lalonde said, Hopper is adjusting to a world in which investors value profits over growth at all costs, a reversal from two years ago when interest rates were markedly lower. With the company hoping to go public in the next year or two, “You have to adapt to that new reality,” he said.
“We were running a lot of initiatives that were not revenue-generating, we’ve always done that,” he added. “But the world has changed, money is no longer free. And we need to move to profitability. There is no magical secret to why we’re doing this. It’s to cut our burn rate and arrive to break even as fast as possible.”
The 250 job cuts are greater in absolute terms than when the company cut nearly 50 per cent of the 340 employees it had early in the pandemic. Hopper joins a slew of other Canadian early-stage technology companies that have made significant cuts to staff this year, including Paper, Talent.com, Hootsuite, Ritual, Symend, Clutch and Clearco. Shopify, Canada’s most valuable technology company, cut 20 per cent of its staff in May, after cutting 10 per cent last year.
The tech sector has shed more than 400,000 jobs globally since the start of 2022, according to the job-loss tracking site layoffs.fyi, as companies have slashed costs to preserve cash and drive to profitability. Several companies have filed for creditor protection or sold for a fraction of their former valuations. The slump began in late 2021, when publicly traded tech stock prices crashed in anticipation of rapidly rising interest rates.
Central banks began hiking those rates in spring 2022 to combat inflation. With borrowing costs expected to remain high for some time, many observers expect a continued shakeout in the tech sector.
Hopper has continued to flourish amid the tech sector’s travails. The company’s valuation topped US$5-billion in 2022, and this year its revenues surpassed US$500-million, up from US$14-million in 2019. Hopper has ample cash reserves, Mr. Lalonde said.
The company initially made its name with millennial consumers by building a mobile travel-buying app that predicted the best times to purchase flight tickets inexpensively. It started selling flights, then offered lodging and vehicle bookings as well, also through its app.
But Hopper has distinguished itself from other online travel companies by offering a unique set of high-margin ancillary financial products for travelers, built by applying machine learning to vast data sets obtained from travel booking systems. For example, Hopper sells travelers the ability to freeze flight prices for days, cancel for a full refund for any reason, rebook a missed connection at no extra charge or change a ticket to a different day without forfeiting its full value. Hopper takes on the financial risk for the products, leaning on algorithms to price the offerings dynamically.
Those new offerings enabled the company to bounce back quickly from the pandemic and even double its revenues in 2020. Hopper has since parlayed those products into partnerships with Sao Paulo-based digital bank Nubank and U.S. credit card issuer and Hopper investor Capital One Financial Corp. Mr. Lalonde is looking to strike similar partnerships globally. Hopper has also started partnering with airlines, offering its “cancel for any reason” service to Air Canada customers through the airline’s website.
But the company’s success in capturing a sizable share of the online travel business has raised hackles from one rival: in July, Expedia ended a five-year partnership in which it provided lodging inventory to Hopper, saying the company’s ancillary products “exploit consumer anxiety and confuse customers, leading them to purchase services they neither need nor fully understand.”
Mr. Lalonde responded last week at the Skift Global Forum travel conference, saying of Expedia: “We have a much better B2B platform, a much better B2B product, and that’s a huge chunk of their business. … So I don’t think there’s any mystery that that reaction was competitive.”