Backroads: Tom Hale. How a desk worker became a trailblazer in active travel

26:07Hey, welcome back to How I Built This. I'm Guy Raz. So it's the early 1980s, and Tom Hale is busy leading bike trips around the southwestern U.S. Backroads is growing at a steady pace, but it's still a pretty small company. And Tom is about to face a setback he cannot afford. The bikes were in our warehouse in San Leandro. We got burglarized, and they stole half of our bikes. That was a problem. I reported to police, and we put out a reward for information. And this young fella came by and said, hey, I know who stole your bikes. And I said, well, okay. And it was in the neighborhood. I said, well, let's walk over.

26:52And it was at nighttime at that point. Walked over to the corner, and he said, that's the house, like two, three houses away. So I was like, oh, my God, I hope that this is right. and I hope they don't come to the door with a gun. But I went to the door and this young fella answered the door. And so I just took it upon myself and said, well, by the way, I think you've got about 12 of my bikes. And I think, oh, and I also added, and what was his name, the police guy? Detective Ritter says this is still a prosecutable offense. So if you don't want that to happen, get your bikes right now. I want to know where the bikes are.

27:28So he went up into the attic and started dropping bikes down. Wow. Anyway, you know, I got my bikes back. So, all right. So you, I mean, I'm just thinking of the logistics of doing this. And again, this is like early 80s, pre-internet, you know, it's like mailing letters, phone calls. Hopefully people will pick up. How did you figure out how to plan all the logistics for each of these trips? I mean, you had an office in San Leandro. You had to figure out enough food for each trip. You had to figure out the right bikes to bring because there were different sizes for people. You had to bring water.

28:07And I mean, how did you start to figure that out? You know, well, first of all, it's not rocket science. And secondly, I love logistics and I'm good at that sort of thing. And thirdly, I never was without a notepad in my pocket and a pen. And so I was constantly improving and thinking. And it's actually a very complicated business now. We're spending tens of million dollars on technology to harness everything we have and how we communicate, blah, blah, blah. But back then, it was just figuring it out as we went. And who were the people initially going on those trips? I mean, there was a culture of cyclists, but those kinds of cyclists I don't think would have gone on organized trips like this necessarily, right?

28:52Those are hardcore. core, like, were those the kinds of people going on your trip or was it more casual cyclists, younger people? It was, no, I would say that the demographic was probably a lot of folks in their 40s and 50s and certainly younger and older. We've had some amazingly fit people in their 80s on our trips that probably rode the younger folks, outrode them like crazy. But we weren't really targeting gung-ho cyclists. We were really interested in this as being a much more holistic experience. And I would say that we've always been experts at accommodating mixed abilities. OK. I mean, given how intense the cadence was, right, you are leading trips or you're back at the office trying to prepare for the next one.

29:45And it seems like at times it was a house of cards because you're on a trip and somebody in the back, like somebody manning the store, I don't know, quits or there's a problem. Like you don't have cell phones. It's like you could all just kind of collapse maybe temporarily. But did that happen? Were there situations or times where you're out on a trip and you've got to go back because there's like a fire that you have to put out at the office? Well, you know, the best example I can think of is when I, this is very early on, when we only had one office person, and she quit in the middle of me leading a trip.

30:22And so I had to come back and man the office. And, you know, that was just kind of stupid to only have one person maybe. Certainly didn't do that again. And we, I, built up a very strong structure around supporting everything we have to do. I'm curious about expenses. Like at what point, because you didn't have any investors, right? I mean, this was all. Didn't have any investors. Never. It's remained a 100 % closely held family business for 46 years. And my dad and my uncle and my best friend from graduate school, they all, for some reason, I had this$30 ,000 amount in my head that that's what they provided as a loan.

31:11And it was always a loan to get a very short-term loan to get through the winter. We are a very strong cash flow company. I read this little book when I was thinking about starting this company up. It was a really small book called Buy Low, Sell High, Collect Early, and Pay Late. And you didn't even have to read the book. You just read the heading. And if that's the kind of business you have, it's a really good thing. Our guests, first of all, are paying their deposit maybe 90 days in advance or more on average. We are paying the hotel sometimes. The balance due is paid after we have already finished the trip.

31:52So I didn't know that that would become so important, but it made us able to do this. Right. So you got, it was like a pre-order almost for a product. You basically get the deposit. So you've got some cash to work with, then you'd get the full amount, you know, within a few days of the trip starting, then you do the trip and then the hotels don't have to be paid until after the trip is over. Right. Exactly. I read a story about an early trip you took, and I want to kind of talk a little bit about this because there was a serious accident like you were in a van and it like flipped over and tell me what happened so we were driving crossing the nevada desert just east of elko nevada and the driver uh reached down to uh swat a bug off her leg or something anyway she went off the embankment and we rolled the van a couple times i felt like we were in a rock tumbler and it was all steel tool chests, propane containers.

32:54Just imagine all that was going around as we're spider-manning through the air. And anyway, we came to a rest, went and made it over to the edge of the freeway. And we're laying there side by side and Bill, one of the leaders said, well, I guess that's it for the summer. And didn't miss a blink. It's like, my response to that. Well, I don't think so. We'll figure it out. So we took the ambulance to the hospital and we actually walked out of the hospital. It was amazing. I had broken ribs and they had neck braces on and we were really beat up. We made it to the, I think the Salvation Army to get some clothes.

33:37We didn't have a thing on our person. And we walked out of there with these puffy slippers and Kathy could, one of the leaders, she could only walk about, I don't know, 50 yards with that before she had to like kind of sit down. But they, um, Bill and Kathy went on to lead the next two trips. I went back to get another van, um, to meet them and we finished, uh, it was a pretty rigorous cause we had to keep moving the seats in the van in and out and they were heavy and we had to move big, heavy picnic tables around. So I, my, my ribs never got well. We were sleeping on the ground and got back to Oakland, pulled into the driveway.

34:20And I kid you not, one of the tires went flat right then and there. And we pulled open the sliding door of the van and it fell off the hinges. It was like a, it was an omen from somewhere, but it was a, hell of a summer. I'll say that. Tom, at what point, I mean, so for the first few years, you're leading trips mainly in the Western, only I think in the Western United States, the loop, right? This loop through national parks in the Western United States. At what point did you or somebody who you worked with say, hey, maybe we should go to somewhere else, like maybe outside the U.S. Yeah. So this is a seasonal business.

35:05It's a seasonal business now. I mean, we run, you know, probably mainly spring to fall, spring to fall. Yes. And so it was, it was totally spring to fall then. And so we, you know, didn't take much to think that we should branch out. So we started with, let's see, I, we did Baja, Hawaii, and New Zealand in pretty short order, as well as Bali, I think it was. So you, because I read you started Hawaii in 1984. So at this point, you're like five years in to the company. So you have some experience, but really all the logistics are being done. I mean, you've got your warehouse, you've got your bikes, you've got your van.

35:47And how are you going to do that in Hawaii or two years later in New Zealand? Let's start with either of those. I mean, you had to basically replicate that without the van, without the bikes, right? You're right. So, you know, we figured out how to ship bikes. I don't know if they had rules back then in all of these places that we should have been adhering to. My guess is they probably did have rules and we probably weren't adhering to them. So we basically did things as close to how we do them in the States as we possibly could. We used our national leaders, which were U.S. and Canadian at that point for the most part.

36:30And then we also used some local guides in places like Bali. But we really wanted our own leaders to be leading our trips because they were really heavily trained and we could trust them and they knew what they were doing, et cetera. And we'd do the trip. I want to ask you about training people. How did you train people? I'm assuming you trained them by just bringing them on trips. No, we have always had a training program. recruiting, hiring, training, and performance management. Always from the beginning? No, excuse me. Almost always, yeah. Okay. How did you develop that? Trial and error. For instance, we used to have a combined hiring and training event.

37:19And it was a three-day event. And at the end of that, we would choose our leaders out of that. But it took us way too long to realize, well, that's a stupid way to do it. you're spending all of this time and money training people and you're only going to hire half of them or whatever it might be. So anyway, we now have all of our leaders go through 10 days of training that is really pretty intense. And then we have performance management happening for everybody all the time. And we're a heavily metric driven company. We survey to the nth degree. We started out by surveying our guests, for instance, and what we came to see is, well, that would say something about the overall experience.

38:05Great. But we then started asking people, well, how are the restaurants? How are the hotels? How are the local guides and a handful of other things? And we track all that and try to improve the trips. All right. So basically, you continue to expand these trips in New Zealand and then Peru. And really, for the first 10 years, I think, it was bike trips primarily, right? It didn't expand to hiking and walking trips until later on. That's right. Our name was Backroads Bicycle Touring for the first 15 years or so. We didn't officially change it until after that. So great name decision because we could split off backwards if we wanted to, but we held onto that longer than we probably should have.

38:57We were known as the biking company long after we were much more than that. And now we're one third biking, one third hiking, and one third multi-adventure. And really a lot of the business was coming from repeat customers, right? People would go on a trip and then it'd come back the next year. Yeah, we have a very high repeat and referral rate. That's also about one third, one third, one third, repeat referral and new business. But word of mouth is everything in this business. You can't do it without word of mouth. When we come back in just a moment, how surviving two massive downturns teaches Tom some vital lessons, which help him get through the biggest challenge of all, a global pandemic.

39:41Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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41:29That's V-A-N-T-A dot com slash built for$1 ,000 off.

41:42Hey, welcome back to How I Built This. I'm Guy Raz. So by 2001, Backroads has grown from a one-man show into a pretty solid business. Tom has stopped leading trips himself and is now focused on running the company. And up to this point, most of the setbacks have been pretty minor. But in September of that year, all of that changes. 9-11 was just so shocking. And one thing I've learned in this rather seasonal business is that if you have something happen, bad happen in the world, please have it happen late in the fall. Okay, so this wasn't late enough in the fall on September 11th, but it was still late enough to where we'd run most of our trips.

42:27But September is our biggest, most busy month. And so that was crazy. We basically said, if you're on your way to the trip, feel free to go to the designated meeting place. We said the same to our leaders. And we had some amazingly great trips run that week, even that week. And then, of course, we had to kind of figure out the next few weeks. And so we lost a lot of business there. So things slowed down. Yeah, slowed down. And that lasted for quite some time, but obviously it recovered. And then you have the financial crisis, of course, in 2008, 2009. Right. And what did that mean? I mean, did it have a significant impact on people booking trips?

43:11Yeah, so that had a much bigger impact. We had a 43 % drop in business that year. So that, you're kidding, a 43 % drop in business, that's going to kill us. We laid a lot of people off. We, it was really hard, but we were able to look at our business very differently. And so I asked the question of what are we doing that's better than what the competition is doing? What are we doing that we're really doing a great job? If the answer was, this is something that we're doing a really great job on, then the next question was, are we doing enough of it to be able to talk about it? Because one thing we noticed was that, you know, all the companies kind of look alike.

43:54They all put out a nice catalog, blah, blah, blah. But we were better. And I knew we were, but we weren't doing enough of these things to talk about it. So we retooled the company. And instead of having two leaders, we had three leaders. Instead of having one van, we had two vans. And went on and on and on. and we went from really low profit margins to much higher profit margins because we were, we were talking about what we do and how well we do it. And more than anything else we do, we have the best leaders out there. Um, and we treat them well. They're not independent contractors. We, um, we house them between trips and just have a lot of, um, we just don't subcontract.

44:39How many total employees do you have? We have about 1 ,300 employees, I'd say right now. And some of them are tour leaders. Some of them are in the headquarters. So are all the employees full-time? I mean, are some of them seasoned? No. All of the folks that are working more or less outside of the leader ranks are full-time. Many of the leaders are full-time, as full-time as they want to be. It's a lifestyle job and it can be really demanding. So there's plenty of leaders that are happy to take the winter off, but others want to work all the time. So, yeah. Tom, I'm curious about COVID because COVID really was, I mean, it was disastrous for anyone in the service industry, but all of a sudden people not only weren't traveling, they were scared to travel, they're scared to be around other people.

45:26I mean, airline business almost collapsed. Right. When it became a reality in March of 2020, you know, this is when you're just about to launch your spring trips, what happened? Yeah, it was just disastrous. And the only reason we had any signups that year is because we had signups before February and March. But yeah, we basically stopped all this revenue, more or less stopped for about a year. And we laid off people. We did temporary layoffs, full-time layout. We even reduced pay. And then we made a lot of that up after we came out of COVID, but we did everything we could think of. And the one thing that I've gotten pretty good at is, you know, we're going to come out of this stronger than when we went into it.

46:16And I attribute my belief in our ability to do that to the experience we had with 9-11 and Great Recession, because we, as tough as COVID was, it was just hellacious. I mean, all of the rules we had to follow and, you know, everybody was in the same boat, but we came out of COVID faster than anybody purposefully. There was some, I think our guests were incredibly generous with us. You know, we always survey our guests how to go and they were, you know, quite honestly, well, I think they were overly generous because, you know, The National Park restaurants aren't exactly known for their fine cuisine to begin with, but it went from that to boxed lunches because of COVID.

47:00And so really, I think our guests were just so darn happy to be outside and doing something with people that we shot up in business in 2022 like you can't even believe. So now I think how many trips on average do you offer a year? We'll do about a little over 5 ,000 trips this year. 5 ,000 trips. Yeah. So, Tom, I mean, when you look at, I think about COVID, for example, and how people talked about COVID is going to change everything. And in fact, it didn't really change everything. You know, people went to remote work for some time, but more or less are back in the office. People said you wouldn't shake hands anymore, that masks would be the norm on airplanes.

47:42I don't see masks on planes very often. Do you think that travel or the way we travel or how we choose to travel or why to go to those places will change? I mean, let me just give you my take for a second. I think it has changed already because of social media, right? When I was a backpacker in Europe in the 90s, you'd go to places and it was a frontier. There's no one there. And now you go to places that nothing is hidden anymore. There's no secrets. Only the insiders know this because it's all on Instagram. There's somebody who has set up a tripod and is posing for photos for seven hours in one spot because they want to get the right social media photo.

48:24I'm astonished that people would travel around the world to wait three hours for gelato and skip seeing a masterpiece in the museum that nobody is going to. I experienced that in many cities in Europe. The museums are empty in many of these cities, unless it's the Prado or the Louvre or the David statue. you but the other ones are empty but people are waiting for two hours for gelato waiting to get the perfect selfie to put on instagram well i'll back up just a little bit which is to say that i will avoid those kinds of places that you just referenced to the nth degree i hope that most of our guests will avoid those kinds of places i don't care they don't of course they can't they can't you want to go well actually to florence you got to go to florence well venice that's not the part of travel we do though um yeah the way we travel we're biking uh by the way we're not there's not 25 of us going down the road as a pack you are 100 riding at your own pace and so you can never see another guest on the trip but you're out there interacting uh with in on little towns we go through in these beautiful european villages there's a little sidewalk cafe.

49:34It's not an Instagram heavy environment. I'm not saying that there aren't those places that we have, but, um, and even on our hiking trips, we're out hiking. And so, um, I agree. It's a real, it's a unfortunate thing, but we do our best to avoid those kinds of places. Sometimes we're able to go in the morning and miss something that negative aspect of a place. And sometimes we just don't go there anymore. Yeah. You know, it's an interesting point because I think that as social media has kind of become a reality sort of just a reality of life, if you go to Venice, the only time to see Venice and by the way, if anybody listening is going to Venice, get up at 5 in the morning and walk around Venice between 5 and 7 in the morning.

50:24That is the time to see Venice because that's when the delivery people are out and the people working in Venice are opening the shops and the streets are amazing. It's beautiful, quiet. You can really get a sense of that city. But really after 10 a.m. And that's true with every city. That's what I do. I take a run in the city at 5 in the morning, maybe 6. And you're so right. And you can do it. You can take a walk. But yeah, you want to get out there before the crowds arise and it's an entirely different place. So where, I mean, how do you think that technology is going to change, if at all, how people are going to interact with what you're offering, right?

51:08I mean, you know, now like I'm going to, we're going to go on a trip, a family trip in December to Asia. And I've already done this. A lot of my trip and travel, I now start with AI to help me kind of, and then I'll do deeper dives of my books and other things. But it's made it really, really interesting, actually, to work with AI. Yeah, I think there's a lot of opportunity that we will, I know there's opportunity and we will take advantage of much of it. And I know at the same time that we are going to be hypervigilant about where it hits a boundary that we don't want to mess with. we want to have our voice be our voice but i think there's a lot of ways to make life more efficient also um having to do travel copy from scratch all the time may not be the best way to do it top when you think about you know this business that you started right when you were 26 and where it is now i think you're one of the biggest adventure travel businesses in the u.s right if not the biggest one i think so yeah and so when you think about where you are now thousands of trip options every i mean i was looking through the catalog it's unbelievable the options and i wonder when you think about all of the you know this journey you took right and where you are now how much of the success of this business do you attribute to the work you put in the grind and how much do you think happened because it just the timing was right and and you got lucky.

52:38Making the decision to do this initially in Las Vegas, waking up in the middle of the night, I attribute that to luck and just a fortuitous moment. But I got to say that in general, the grind has been consistent, nonstop, embraced, and has meant everything. And I don't resent it. I embrace it. And, you know, my original short-term partner who said, this is just a lot of work, you know, she really hit it on the nail. It's a lot of work. And I don't think, you know, and people that start this as a hobby and keep their day job, I can't even imagine. Good luck. That's Tom Hale, the founder and CEO of Backroads.

53:28By the way, a while back, the company started offering e-bike options on their trips, and it quickly became a really popular choice. So much so that last year, in response to guest feedback, they started offering bike trips only for people who want to do it the old-fashioned way, with no electricity and just legs. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at GuyRoz.com or on Substack.

54:06This episode was produced by Casey Herman with music composed by Ramteen Eroblewe. It was edited by Neva Grant with research help from Sam Paulson. Our engineers were Patrick Murray and Jimmy Keely. Our production staff also includes Alex Chung, Chris Messini, JC Howard, Carrie Thompson, Catherine Seifer, Andrea Bruce, Ramel Wood, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This. And don't stop the podcast just yet, because right now you're about to hear an amazing small business story that you don't want to miss. This segment is presented by American Express. With a business platinum membership, the best just got even better.

54:50And this week's story comes to us from Stephen Davis. Back in 2021, a friend of his had just moved to Arizona. To help out, Stephen decided to hop a plane from Detroit to Phoenix. I had found a flight for like$40 round trip on one of the budget airlines. It's a great deal. But you add your carry-on fee. It was about$50 each way. So I was like, wait, for me to carry my own bag onto the plane and put it in overhead, I got to pay twice as much as the actual flight itself? That just bothered me. That's how budget airlines get you, right? The ticket is cheap, but they'll charge extra for things like bottled water or printing your ticket at the airport or carrying on a roller suitcase.

55:35But one of the things that are still free, a small personal item like a backpack or a purse. And that's when Stephen noticed something at the airport. I just looked at the sizer for the personal item and the carry-on sizer. And I just was like, well, it's not too much smaller. I wonder if my suitcase could fit. I put it in the sizer and I looked like, well, if it didn't have these wheels, it probably would fit inside the sizer. Stephen got to thinking, what if there was a carry-on roller suitcase big enough to hold all you need for a trip, but could also shrink down just a little to be the size of a free personal item.

56:14All you'd have to do is press a button and pop. You could take off the wheels. Take off. And he thought that would make a pretty cool name for a luggage company too. So despite no background in product design and while working a full-time sales job, Stephen gathered up some seed money and found a manufacturer on Alibaba to build out a prototype. After five months of back and forth, the first run of suitcases was ready to be sent to his house. All 500 of them. The day the shipment came, I came home. It was suitcases stacked to the ceiling in our living room, in our garage. It was slow going at first.

56:57Stephen estimates he sold about 50 during the first few months, mostly to friends and family. But his big break came after he posted a video of himself at the airport showing the takeoff suitcase in action. That got 700 ,000 views on TikTok in his first real sale. Her name was Courtney. She was like, I've been waiting on something like this. I travel, you know, budget lines all the time. And so I'm going to make a video of it. And that YouTube video is actually what started driving ourselves. live. Shortly after that video went viral, that first run of 500 suitcases sold out. And Stephen realized that building out a community of fans online was critical to his success.

57:39Having a tight-knit group of customers who champion our brand is what's helped our growth. I actually ran to a girl at an airport. She made me feel famous. She's like, oh my God, you're Takeoff. Takeoff has grown so much since 2021 that it's now Stephen's full-time gig. He's also launched new products like vacuum-sealed bags and a neck pillow that can be stuffed with clothes. We try to let people pack more without having to pay more. I'm sure that Budget Airlines doesn't like us, but we're here for the people. We like the rival hood of the airlines. That's Stephen Davis, founder of Takeoff Luggage.

58:15His small business story is presented by American Express. To build a business like no other, you need a card like no other. There's nothing like Business Platinum.

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