The "Free Tour" Business Model (and Why it's Broken) (2024)

It's time for the "Free Tour" industry to grow up

EDIT: Nine months after publishing this article, I wrote a follow-up here explaining the results of my decision.

Since 2005, a new business model has taken the world by storm. Businesses like Sandemans New Europe, Strawberry Tours, FreeTour.com and many others have been able to grow into behemoths of the industry. In 2.5 years, my own "Walks 101" has become the largest walking tour operator in Melbourne and the best reviewed operator, full stop.

Yet, at a time when the "Tours and Activities" sector is at the forefront of industry, very little is being discussed about how we run our businesses.

I'd like to take the opportunity to first explain what free tours are (and why I think they're great).

Next, I'll describe what I feel is a core flaw in the way we're running our businesses and how I'm trying to change it.

The Business of "Free Walking Tours"

I'll start by expressing my belief that walking tours are the best way to see a city. Walking (as opposed to biking, bussing, or Segway-ing) allows ultimate freedom. Walking tour guides are free to bring a group by a new mural that was just installed, to a cafe where they know the owner down a back alley, or to pause for the living, breathing moments that make a city great (like when I would stop for my group to marvel at the Changing of the Guard in Westminster).

Everyone should try a walking tour, but not everyone can, primarily because:

They are prohibitively expensive (average walking tour price in Melbourne = $89)
They are often booked out well in advance
Many require minimum numbers in order to run

Free Tours invite guests to join the tour without paying any money up-front, and without requiring a booking. At the end of the tour, guests are invited to pay what they feel the tour was worth, but payment is always optional.

In doing so, we allow solo travellers, guests who are in town for a conference and only have same-day availability, or guests for whom $89 is too expensive a price point to enjoy an outstanding three-hour walking tour.

The trade-off is that the groups may be a bit larger (usually 20-30) and the guide will out of necessity have a more theatrical/presentational quality.

In bringing free tours to the Australian marketplace, I followed a tried-and-true method: I lovingly “borrowed” my model from existing operators. Free tour operators the world over tend to use the following business model:

Why the "Free Tour" Model (As It Currently Exists) is Problematic

A couple years into the existence of Walks 101, the model I imported from Europe was beginning to show some cracks:

Guide morale was terrible — I let guides assume the risk, but this would lead to frustration when a particular group were poor tippers, or if poor weather led to lower-than-expected group numbers.
Operations were difficult —guides began to understand which departure times were most lucrative and would refuse work at times when they didn’t feel they'd get a return.
There was a high degree of risk in this operation, as the guide assumed liability. We required our guides to have public liability insurance, but this created significant challenges in our recruitment process and limited the pool of candidates from which we could recruit.
Limited ability to innovate —since the guides don't make their revenue from the company, any innovation had to be fully supported by the guide team, or else they would object (and rightfully so, since I would be risking their income)

The freelance model has benefits for both sides — the company doesn't incur staffing costs, and the guides get flexibility as well as a direct relationship between their performance and payout.

However, drawbacks started to outnumber advantages.

How was I to make sure all tours had a guide willing to work on them (even the less profitable ones)?
How could I keep guides giving tours even if only four guests arrive?
How could I maintain a great guide team when so much of the work dries up over winter?

Accepting High Guide Churn as the Norm

These are problems all the previous "Free Tour" companies for whom I worked encountered. There's remarkable cohesion in "Free Tour" guides worldwide, compete with a private Facebook group and ample gossip.

In every tour company I worked with...

In every tour company one of my colleagues went to work with...

In my own company...

...the result was the same. Guides and brands accepted an incredible amount of guide churn as the cultural norm of the "Free Tour" model. Unsuccessful guides would self-select out in just a few weeks. Successful guides would last a year or two. The best of the best might stick around for a few years, but were liable at any moment to have the work dry up, as the brands had no obligation to continue providing work.

The company I had created to be a guide-centric business was falling from its mission. In 2.5 years, I churned through 45+ guides. Some lasted a few weeks, a couple for more than a year. Some of the professional relationships I had with guides ended in frustration, anger, tears. I need to accept responsibility as a business leader for taking that as an acceptable culture.

A New Way to Run a "Free Tour" Company

Earlier this year, I changed course. From a customer-facing perspective, I believe in the "Free Tours" concept today as much as ever. It's my back-office that needed a significant change.

At Walks 101, we turned the "Free Tour" model back around:

Guides collect, but do not keep the free tour revenue (formerly referred to as “tips”)
Guides do a combination of guiding and back-office work
I pay a competitive industry wage all year long ($31.25/hour), providing stable income by building a war chest in the summer, and using it to make payroll through the winter
I'm creating career-track jobs complete with paid annual leave, penalty rates for weekends and evening, superannuation (AKA retirement pay), etc

The biggest factor in making this a success is the ability to forecast. Could I predict how many guests would arrive to a given tour (even without pre-bookings)?

Once I did that, could I predict how much each guest would give?

Will guests be as willing to give in the same way — and will guides push as hard —if they know they're making a flat rate for the tour?

The first question was easier —I had two years of data to predict how many guests would show up to an 11 am tour on a Tuesday in the rain versus a 3 pm tour on a Saturday in the sun. Forecasting group sizes is attainable. Forecasting revenue from the free tour is harder.

To my knowledge, Walks 101 is the first free walking tour company anywhere on the globe to offer competitive wages in lieu of the old "Free Tour Model."

It's important to me, not just because I want to be a responsible employer, but because I want guides who are more than just for-hire guides. I want best-in-class guides who believe in our mission to bring "Free Tours" around the world, and to be soldiers in the growth of the company to Sydney, Auckland, and beyond.

By changing my model, I hope to build a team that will be excited by this prospect. At present, I have one full-timer on this method, with 5 casuals who will have the opportunity to grow into a bigger role as the company grows.

Consequences (or, How I Lost All My Guides)

In making this decision, I was clear-eyed about the fact that this version of my business wouldn’t work with all of the members of my freelance team. Some had come to enjoy their flexible lifestyle. They enjoyed working for 2 or 3 of my competitors simultaneously. It wasn’t a decision I made lightly, and it was terrifying to bet the company on an unproven concept.

In the weeks following my decision, I lost all but one of my team. I offered some work under the new model— (the response: "Why would I work for $30/hour when I make triple that on the freelance model?)

Others had become disillusioned with the "traditional" free tour model and at their wits end with the uncertainty.

This winter we rebuilt our team from scratch, all on a fixed hourly wage.

The tenor and tone of the new team is remarkably different. Guides aren't on edge anymore about making rent. I can ask a guide to work a Saturday tour, and they know it's going to pay them enough (with bonuses for working weekends and evenings) to be worth their while.

What's more —I can ask them to go beyond the call of duty — for example, recording "thank you" videos to be sent to our guests. On an hourly wage, we have a clear expectation of what their time is worth.

I'd be remiss if I didn't mention that I'm in the process of hiring 15 guides for the summer season. If you want to join the team, click here for details.

The Future for Free Tours

I believe as much today as I did when I started working with "Free Tours" that this model is an innovative, inclusive, and inspiring one. It allows us to welcome guests who may never have booked a walking tour in the traditional way for the reasons I outlined earlier.

As the "Free Tour" concept enters its 15th year in existence, it's time to start treating these products like the serious entrants they are in the "Tours and Activities" arena.

One way we can do this is by providing sustainable, ethical employment opportunities for the talented individuals who give these tours.

By over-relying on freelancers, operators (like myself until recently) are unfairly putting the onus of risk-taking on the folks who are functionally acting as employees. These people have no hope of cashing in long-term on the time investment they've made that has helped grow the company, and no protection in the event of an injury or insolvency.

It's incumbent upon operators to look after their guides, and it's time for more of us to be employing rather than relying on freelancers, particularly the unique arrangement enjoyed by "Free Tours" the world over.

In doing this, I hope to help bring "Free Tours" to their proper place in the exciting developments in the "Tours & Activities" sector.

The "Free Tour"​ Business Model (and Why it's Broken) (2024)