Skift Take

Hopper is in a much deeper state of hurt than it is letting on. It has a trimmed down vision to focus on direct hotel relationships after two of the biggest online travel agencies in the world departed as partners.

Fearing another Expedia-like breakup, Hopper abruptly ended its hotel partnership with Booking Holdings a week ago, Skift has exclusively learned.

Hopper feared another blow to its reputation if a second major online travel agency, namely Booking.com, went public about a soured partnership so soon after Expedia Group did so in July, several travel industry sources and former employees said. Hopper told employees it proactively disconnected Booking.com’s accommodations supply last Friday, September 29.

Hopper was concerned how these hits on its brand reputation would impact business-to-business partnerships, such as with Capital One and other future distribution partnerships, as well as with existing airline partners, sources said.

Hopper announced a deal on September 27 that expanded its supply relationship with wholesalers Hotelbeds and WebBeds before Hopper disconnected Booking.com. Hopper was keen on terminating its relationship with Booking first — and it did so without advance notice — so that Booking couldn’t claim that it was the one to sever ties, and Hopper thus hoped to avoid negative fallout that would deter future supplier or distribution agreements.

“The Hotelbeds deal wasn’t a done deal,” said one travel industry source. “So if Booking disconnected Hopper and would have made it public, like Expedia did, maybe Hotelbeds would have backed off the deal. Hopper disconnected Booking, so Booking wouldn’t announce anything.”

The existence of a partnership where Booking.com supplied hotel and short-term rental inventory to Hopper had been in existence for more than a year, possible much longer, but has not been publicly disclosed until this story.

A source close to Booking Holdings said the company was testing Hopper’s fintech products across Booking’s brands, had been supplying Hopper with accommodations inventory, and was looking to expand that inventory partnership for Hopper’s consumer and B2B businesses in exchange for a traditional revenue share arrangement when Hopper ended the partnership an alleged “breach of contract.”

Booking Holdings is not challenging that perceived contract violation because Hopper’s fintech products performed so poorly there was little adverse financial impact, the source said.

A spokesperson for Booking Holdings confirmed Friday that the company is no longer working with Hopper.

Hopper didn’t respond substantively to several requests for comment.

Hopper Didn’t Want Another Expedia-Like Blowup With Booking

The Expedia withdrawal from Hopper adversely impacted Hopper’s bottom line, and complicated partner relations, according to several sources.

For example, United Airlines gave Hopper a 30-day notice that it planned to end its Hopper partnership after the Expedia blowup. However, United stayed on after Hopper met some of its demands, including eliminating strike-through pricing of higher fares, and providing an incentive to first-time bookers of Hopper carrot cash to subsidize their initial bookings, according to a former employee who was laid off.

United saw both of these measures as undercutting United’s airfares.

“The Expedia exit was impactful,” a former Hopper employee said. “As much as Hopper said it wasn’t — it was.”

The Layoffs Came Two Business Days Later With an Initial Slack Notification

Hopper employees would learn that layoffs were imminent two business days later on Tuesday when Hopper co-founder and President Dakota Smith sent a Slack message and email informing the staff that their managers would contact them if they were being laid off, sources said. (See the email, which Skift obtained, embedded below.)

Smith wrote that Hopper decided to conduct a reorganization “to support our higher growth, priority areas, and more quickly move toward profitability. Unfortunately, this means that we will be reducing the size of our workforce today and some of our colleagues across the globe and across departments will be affected.” He told those on the hit list that their managers would be contacting them shortly.

After managers contacted the selected employees and informed them they were fired, they were locked out of Hopper software within minutes, making it impossible for some to bid goodbye to their fellow employees or to retrieve any materials, sources said.

A press report, which Hopper didn’t deny, said it laid off 30% of its workforce, or 250 employees, on Tuesday. Among the casualties were the general manager of Europe, and marketing managers in Europe and Latin America.

Another as yet unreported aspect of the reorganization is that the company shuttered Hopper Homes, its vacation rental offering. It remains to be seen how Hopper can be a force in accommodations with its Millennial and Gen Z audience without vacation rentals. Hopper’s corporate travel teams also took a massive hit.

When Expedia Group ended its Hopper relationship in July, Expedia’s Vrbo vacation rental unit likewise stopped supplying Hopper with those properties. Hopper had numerous other vacation rental partners, including Evolve, Hostaway, and Vtrips.

The Layoffs Hit Hard

This is how one now-former Hopper employee described the layoff process:

“Everyone was traumatised. Nobody knew if they were going to be let go or not. After this I witnessed how colleagues started disappearing from Slack one by one. I was in the middle of the meeting [a town hall] and my colleague was called and she started to cry. She left the meeting, and five minutes after she disappeared from Slack. About 10 minutes passed and I also received the call from my manager This call lasted 2 minutes. My manager told me he/she did not know why the decision happened, but there was nothing he/she could do.”

See the Hopper email to employees about layoffs and the company’s strategy below:

Hi everyone,

I have some difficult news to share today. After much deliberation, Hopper has decided to re-organize our business in an effort to support our highest-growth, priority areas and move more quickly towards profitability. Unfortunately, this means that we will be reducing the size of our workforce today and some of our colleagues across the globe and across departments will be affected.

To be clear, in no way does this reorganization reflect on the work of the team. This is not about individual performance but is instead about adjusting to the new macro reality for growth companies in general and our company specifically. I’m very proud of the work and contributions of the team and I thank all of you for that.

Below I will give some context behind this decision, what to expect and where we go from here. I will also host a town hall later today to discuss this and our plans going forward.

Why is this happening?

Like many growth companies now operating in a higher interest rate environment, we need to accelerate our timeline to profitability as there is less and less activity in the private markets. At the same time, we are facing ever-increasing competition. By doing this restructuring we are ensuring that our future is in our own hands with our current cash position and with no further cuts planned. The re-org is not a reaction to the past, but is intended to put Hopper in the best position possible for the market we expect in the future.

Going forward, we will operate the business with a narrower focus on three areas that are critical for our company’s growth:

  1. B2B
  2. Direct hotel supply
  3. Maturing our consumer business

This means we will be reducing or eliminating our investments into more exploratory areas of the business that are not yet generating material gross profit to ensure that we can service our three priority areas while reducing our bum at the same time.

B2B: This year, we prioritized the company’s evolution into a full-scale travel platform, powering both the Hopper app and our B2B partner channels. In recent months, the growth of our B2B business has accelerated rapidly – we now expect our B2B offering to account for two-thirds of the business next year. We must ensure that we are organized to fully realize that opportunity and support our B2B partners.

Hotel supply: In parallel, as you’ve heard us say in recent months, we are laser-focused on continuing to build our direct global hotel supply so that we can deliver the best experience for both our partners and our customers. Our goal is to get to 85% direct in 2024, and we must organize resources Internally to help us get there on schedule.

Consumer: The Hopper app will continue to be critical to the growth of the Hopper platform – consumers love it, and It’s also where we test and iterate before we roll out products to our HTS partners. Focused on being the best place to book B2C travel, we will continue to prioritize the merchandising tenets and will continue our strategy to invest in user acquisition in a scalable, sustainable way. Furthermore, we will be launching Hopper.com this year and growing our consumer business from app only to multi-channel.

What happens next? What does this mean for our teams?

Employees impacted by today’s news will be contacted by their managers shortly. Remaining employees will be reconvening at a company town hall later today to discuss these developments in more detail, as well as the areas of priority for the business moving forward. A calendar invite will be distributed later this aftemoon, shortly before the town hall.

Our priority is to make sure the colleagues leaving Hopper are supported in every way possible throughout this transition. People Ops will be in touch with those whose roles have been impacted with details regarding the next steps and their exit packages.

In conclusion

This decision Is very difficult, but we believe it is necessary for Hopper. Once more, to our colleagues whom we have to part with today, this decision is not a reflection of your work, but only of our evolving business and macro environment. I would like to personally thank you for your hard work and dedication in making Hopper what it is today and wish you the best of luck in the future.

– Dakota

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Tags: b2b, booking holdings, booking.com, corporate travel, deals, evolve, expedia, fintech, future of lodging, hopper, Hostaway, hotelbeds, online travel newsletter, partnerships, united airlines, vacation rentals, vrbo, WebBeds

Photo credit: Hopper founder and CEO Fred Lalonde (left) at Skift Global Forum 2023 in New York City. Skift

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