Last year, John O’Sullivan of Depot Adventures flipped free tours on its head when he questioned whether relying on freelance tour guides was the best way to go.
Despite being the largest walking tour operator in Melbourne, along with the best-reviewed, there were noticeable flaws in the business model that he could no longer ignore.
- Guide morale was often down because of poor tippers
- Many guides only wanted to work shifts that promised the greatest return
- It was difficult to innovate because guides had to be 100% on board with changes considering their income was at risk
You see, the way most free tours work is guides take all of the tips home, but owe a fixed cost to the operator for every person on the tour. Guests don’t pay anything upfront, and tipping is optional based on what they think the tour is worth.
While some tour-goers are openhanded, others feel perfectly okay walking away with a free experience, even if the guide goes above and beyond to show them a good time (or they just don’t carry cash). As you can imagine, guide churn is often high as a result.
They never know how much money to expect day to day, and everything depends on their performance, good weather, large groups, and generous tippers. John, who strives to run a guide-centric business, realized that this kind of tour guide work environment was doing more harm than good.
So, he pivoted and decided to start from scratch with a new way to operate a free tours company, including building a team of hourly-paid tour guides rather than freelancers.
What were the results?
Nine months later, John shared the results of making the switch from freelance tour guides to permanent employees — which you can check out in detail here.
Unfortunately, he lost fantastic guides along the way who prefer the flexibility of freelancing and the possibility of making double the hourly wage. And of course, he had concerns of his own, like how he’d afford the new staffing costs. Not to mention, others doubted whether his guides would still be incentivized to deliver quality.
But after changing course, here’s what he found (despite the impact of the Australian bushfires and COVID-19 pandemic):
- Gross revenue increased from collecting the full value of the tour (tips) rather than a fixed fee (cost-per-lead)
- Using a Key Performance Indicator (KPI) system, guides were still motivated to do their best, and over half of them regularly earned above the target
- The rise in expenses made an impact, but it wasn’t as severe as John expected, and he’s continuing to work on improving guide performance to compensate for the difference
- Morale went up in surprising ways because of camaraderie in team meetings and the opportunity to learn more about the business
- Full commitment to one tour operator made it easier to count on tour guide availability
- As an employer, his company was eligible for government support, which they wouldn’t have received with only freelancers in place
Naturally, there were also a few challenges, like facing more sick days, meeting higher tour guide expectations, and abiding by employment laws.
Should you also make the switch?
That depends. If you run a free tours company like John, it might be worth considering. He already took the risk of overhauling his business, paving the way so that you can do it, too. But it’s important to remember that he took a calculated risk.
He combed through past data to forecast group sizes for various timeslots, along with potential revenue (a difficult number to pin down based on tipping behaviour) to ensure he wasn’t making a hasty decision. So, you should do the same before taking the leap.
On the other hand, if you run paid tours, you could be in an entirely different position right now. At times of lower booking volume — whether in the shoulder seasons or during a crisis — it might be beneficial to do the opposite and work freelance tour guides into your roster.
(And if you’re only open two-thirds of the year, perhaps it’s a good idea to focus more on learning how to retain seasonal employees instead)
Whatever the case may be, here are a few factors to add to your pros and cons list when deciding whether to work with freelance tour guides or hire hourly employees.
Freelance tour guides
- More wiggle room: rather than paying a full-time salary for a job that can be sporadic, you can pay guides on a per tour basis and only bring them on as needed. In other words, you won’t be on the hook to give your guides work even when there is none.
- A trial period: say goodbye to 3-month probation. Instead of going with your gut in the hiring process and seeing how things play out, you can try out a freelancer first and watch their tour guide skills and qualities in action before asking them to join your company full-time.
- Dip into the talent pool: you gain access to a bunch of talented tour guides who are incredibly good at what they do because they have years of experience guiding many different tours for many different operators. The proof is in the tips alone; most probably wouldn’t go into freelancing unless they knew their performance could pay the bills.
- Backups on hand: if someone calls in sick, you have a supply of backup tour guides that you can count on to save the day last-minute, but…
- Limited availability: since freelancers work for other tour operators, there may be times when no one is available, so you might have to scramble to find tour guides who’ll take the shift or end up cancelling a time slot that an employee could’ve filled in a schedule.
Hourly tour guides
- More selectivity: instead of calling on whatever freelance tour guides are available for a shift, you can be as picky as possible from the get-go and work with only those you’ve personally vetted. You’ll feel confident that your final picks will always deliver a 5-star tour experience.
- Spares for other work: just because there’s a slow day, it doesn’t mean there won’t be work for your tour guides. You can get them to help out in other areas, too, like administration, social media, inventory, cleaning — anything to ease your workload. Most guides will appreciate the opportunity to grow their skillset.
- Tour guide moulding: speaking of, while you’re responsible for adequately training your tour guides (another thing for your neverending to-do list), it’s a chance to refine their skills to fit your tour style and turn them into assets for a value proposition. No more sharing their unique qualities with your competitors.
- Groom top talent: you get a front-row seat to witnessing a tour guide’s full potential. You can invest in their future with tour guide courses and resources and nurture them into leadership positions, such as tour director or operations manager. Why hire outside for those roles when you’ve primed the best people for the job already?
- Brand ambassadors: guides who are committed to your tour company, whether full-time or part-time, can get behind your mission and represent your core values in the field. Plus, share their work adventures on social media, helping to spread the word about your tours to their network of followers.
- All the extras: a higher headcount adds more work to your plate. You have to worry about creating a solid benefits package, payroll processing, and keeping them happy with a healthy workplace culture, regular recognition, and team events. But if you’re willing to go the extra mile, your tour guides will, too.
The gig economy isn’t new to the tours and activities industry. But as you can see, freelance tour guides are suitable in some cases, like when there are infrequent bookings. Whereas, recruiting and cultivating tour guide talent is more beneficial for the long-term. Does that mean a hybrid solution is the way to go? You decide.