YTB Travel Network, a little-known, 6-year-old host agency with some awfully big numbers -- $250 million to $300 million in 2006 sales and 61,000 referring travel agents -- is growing so fast it had to relocate its offices after Christmas, a second relocation in 18 months.
The publicly traded company, now based in Wood River, Ill., outside St. Louis, is also a multilevel marketing business.
Critics, however, employ alternative descriptions, including a pyramid scheme, a card mill or both.
It costs $450 up front plus $50 a month to be what YTB calls a referring travel agent, or RTA. The RTA refers family and friends to his or her own YTB-linked Web site for self-booking purposes; the RTA earns a piece of the commission.
Under a copyrighted compensation plan that resembles an Amway business model, any RTA who brings in a new RTA also earns a referral fee, and when the second RTA brings in someone new, the first RTA gets something, too.
YTB, at its Web home page, promises prospective RTAs "huge discounts," upgrades "and many more travel perks" as well as a "personal travel agent photo ID card and credentials."
The publicly traded company, now based in Wood River, Ill., outside St. Louis, is also a multilevel marketing business.
Critics, however, employ alternative descriptions, including a pyramid scheme, a card mill or both.
It costs $450 up front plus $50 a month to be what YTB calls a referring travel agent, or RTA. The RTA refers family and friends to his or her own YTB-linked Web site for self-booking purposes; the RTA earns a piece of the commission.
Under a copyrighted compensation plan that resembles an Amway business model, any RTA who brings in a new RTA also earns a referral fee, and when the second RTA brings in someone new, the first RTA gets something, too.
YTB, at its Web home page, promises prospective RTAs "huge discounts," upgrades "and many more travel perks" as well as a "personal travel agent photo ID card and credentials."
Based on the YTB's statements about its size and volume, RTAs average not quite $5,000 in annual sales.
YTB owners are well aware of the negative images these details create, and they aim, by growing travel sales, to prove their model is a legitimate travel business.
YTB's controlling shareholders are the Tomer Group (Lloyd Tomer, his son Scott and Kim Sorensen) and the Brent Group (Mike Brent and sons Derek and Darren).
The Tomer Group, all of whom had been multilevel marketers in the insurance business, founded YTB, an acronym for Your Travel Biz.
YTB came to Rezconnect Technologies in Englewood Cliffs, N.J., to arrange for online booking capabilities and private-label Web sites for YTB and its investors as well as access to supplier incentives that Rezconnect had arranged for its licensees.
Mike Brent, Rezconnect CEO, said he did some due diligence at the outset -- by flying to St. Louis very early on Sept. 11, 2001 -- to satisfy himself that YTB's management aimed to build a real travel business and that YTB was not a pyramid scheme.
YTB was a multimillion-dollar travel business by 2004 when the publicly traded Rezconnect offered to buy it with stock. "I could see it would grow faster; we could take the reins off," Brent said. "We raised cash for YTB, and they ran with it."
By the end of 2006, YTB was 10 times as large as its parent, with about 150 staff vs. 15 at Rezconnect, he said, so the shareholders agreed to change the company name to YTB International and move the headquarters to Illinois.
The Brent Group resigned from all YTB board and management positions but continues to operate Rezconnect, which also owns the Travel Network franchise business.
"The baby became the parent," Brent said, adding that, at Rezconnect, "our expertise is not multilevel marketing. We let them [the Tomer Group] run with it." Stock holdings did not change, and Brent continues to be the largest individual shareholder, he said.
Today, YTB's travel business is about 40% air and 30% to 35% cruise, according to Kim Sorensen, president of the YTB Travel Network. He said tours accounted for less than half the number for cruises, with hotel and car rental accounting for the rest.
"We primarily see ourselves as a cruise agency," he said. "The cruise lines help train our people." Besides, he said, it is easier for novices to sell cruises, and there are plenty of prospects who have never cruised.
"Carnival is our best partner," Sorensen said. "It was first to see we emphasized selling travel, not just a card."
Although YTB is an ARC and IATA agency, it outsources air as well as hotel reservations and car rentals to Travelocity for fulfillment.
Volume last year was $250 million to $300 million, but the goal for 2007 is $1 billion, with a further goal by 2011 of being the world's largest travel agency, Lloyd Tomer said. (For more with Tomer, see "In the Hot Seat: Lloyd Tomer.")
While YTB considers its affiliates to be referral agents, not booking agents, its thousands of RTAs do include some sellers who are experienced travel agents, individuals who chose YTB as their host. Some novices also signed on, Brent said, because they wanted to become travel agents.
Several hundred RTAs apply for CLIA cards each month. The number of IATAN card holders is much lower, with two or three being added per month, Tomer said. If a customer wants counseling, calls are taken by YTB's staff; most of those in the call center are experienced agents, Tomer said.
Well aware that the business could be construed as a pyramid scheme, both Brent and Tomer noted that the company was growing faster on the travel sales side than in sales of RTA kits.
Also, Brent said, "we wouldn't allow anyone to call us a card mill." Therefore, he said, the RTA does not get a YTB card without first qualifying for a CLIA card, passing a training course and producing business.
Even then, he said, the RTA must go through YTB, which checks the referring agent's productivity, to use the card for a cruise or tour at travel agent rates.
Sorensen said the company would emphasize training this year for existing RTAs but would keep adding to the numbers.
Why so many RTAs? YTB will be better positioned to grow travel sales if it had more producers, said Sorensen.
Although allowing that 61,000 referring agents is a lot, Brent said, "We're not close to maxing out. Amway has several million, and others have [affiliates] in the six figures."
Although he said he couldn't estimate YTB's max-out number, he said the firm believed it was still at the low end of its growth potential. In addition, it expected to have 600 staff members by 2009, he said, four times today's number, which is the reason for moving into a new office space that is way too large for now.
YTB's controlling shareholders are the Tomer Group (Lloyd Tomer, his son Scott and Kim Sorensen) and the Brent Group (Mike Brent and sons Derek and Darren).
The Tomer Group, all of whom had been multilevel marketers in the insurance business, founded YTB, an acronym for Your Travel Biz.
YTB came to Rezconnect Technologies in Englewood Cliffs, N.J., to arrange for online booking capabilities and private-label Web sites for YTB and its investors as well as access to supplier incentives that Rezconnect had arranged for its licensees.
Mike Brent, Rezconnect CEO, said he did some due diligence at the outset -- by flying to St. Louis very early on Sept. 11, 2001 -- to satisfy himself that YTB's management aimed to build a real travel business and that YTB was not a pyramid scheme.
YTB was a multimillion-dollar travel business by 2004 when the publicly traded Rezconnect offered to buy it with stock. "I could see it would grow faster; we could take the reins off," Brent said. "We raised cash for YTB, and they ran with it."
By the end of 2006, YTB was 10 times as large as its parent, with about 150 staff vs. 15 at Rezconnect, he said, so the shareholders agreed to change the company name to YTB International and move the headquarters to Illinois.
The Brent Group resigned from all YTB board and management positions but continues to operate Rezconnect, which also owns the Travel Network franchise business.
"The baby became the parent," Brent said, adding that, at Rezconnect, "our expertise is not multilevel marketing. We let them [the Tomer Group] run with it." Stock holdings did not change, and Brent continues to be the largest individual shareholder, he said.
Today, YTB's travel business is about 40% air and 30% to 35% cruise, according to Kim Sorensen, president of the YTB Travel Network. He said tours accounted for less than half the number for cruises, with hotel and car rental accounting for the rest.
"We primarily see ourselves as a cruise agency," he said. "The cruise lines help train our people." Besides, he said, it is easier for novices to sell cruises, and there are plenty of prospects who have never cruised.
"Carnival is our best partner," Sorensen said. "It was first to see we emphasized selling travel, not just a card."
Although YTB is an ARC and IATA agency, it outsources air as well as hotel reservations and car rentals to Travelocity for fulfillment.
Volume last year was $250 million to $300 million, but the goal for 2007 is $1 billion, with a further goal by 2011 of being the world's largest travel agency, Lloyd Tomer said. (For more with Tomer, see "In the Hot Seat: Lloyd Tomer.")
While YTB considers its affiliates to be referral agents, not booking agents, its thousands of RTAs do include some sellers who are experienced travel agents, individuals who chose YTB as their host. Some novices also signed on, Brent said, because they wanted to become travel agents.
Several hundred RTAs apply for CLIA cards each month. The number of IATAN card holders is much lower, with two or three being added per month, Tomer said. If a customer wants counseling, calls are taken by YTB's staff; most of those in the call center are experienced agents, Tomer said.
Well aware that the business could be construed as a pyramid scheme, both Brent and Tomer noted that the company was growing faster on the travel sales side than in sales of RTA kits.
Also, Brent said, "we wouldn't allow anyone to call us a card mill." Therefore, he said, the RTA does not get a YTB card without first qualifying for a CLIA card, passing a training course and producing business.
Even then, he said, the RTA must go through YTB, which checks the referring agent's productivity, to use the card for a cruise or tour at travel agent rates.
Sorensen said the company would emphasize training this year for existing RTAs but would keep adding to the numbers.
Why so many RTAs? YTB will be better positioned to grow travel sales if it had more producers, said Sorensen.
Although allowing that 61,000 referring agents is a lot, Brent said, "We're not close to maxing out. Amway has several million, and others have [affiliates] in the six figures."
Although he said he couldn't estimate YTB's max-out number, he said the firm believed it was still at the low end of its growth potential. In addition, it expected to have 600 staff members by 2009, he said, four times today's number, which is the reason for moving into a new office space that is way too large for now.
No comments:
Post a Comment