YTB this month released quarterly financials revealing a continuing loss of affiliated travel sellers and a sluggish pace for recruiting newcomers.
The report covers the first full quarter of business after the May settlement with the state of California, which sued YTB charging that the multilevel marketing company was operating a pyramid scheme and was engaging in deceptive marketing practices.
The terms of the settlement made it more difficult to sell websites to prospective travel sellers and imposed limits on recruiters' earning potential.
Nevertheless, YTB International CEO Robert van Patten said the decline in the number of affiliates, known as referring travel agents, has more to do with the economy than the California settlement.
"Recruiting in California has definitely changed with the 14-day waiting period, but to date, we find the same ratio of people joining YTB after a sales presentation as before the settlement, with the only difference being the sales rep has to make more follow-up calls to answer questions and teach the potential website owner how to develop the opportunities," van Patten said.
The company's latest financials reveal little change in attrition rates for this year compared with last: between 20% and 25% for the third quarters this year and last, and between 60% and 65% for the first three quarters in both years. In addition, the significantly slower pace of recruitment has prevailed throughout this year.
Van Patten said the economy "is clearly our biggest challenge, as it is with every retail group, whether an online store or brick-and-mortar store."
He said poor commission earnings is the primary reason why some RTAs drop out. However, cumulative commissions per RTA for the first nine months of 2009 averaged $86.70 -- not much worse than in 2008, when the average was $109.80.
The main revenue tool for RTAs is the website each buys from YTB.
Van Patten said YTB was focusing efforts on making the RTAs more profitable by including the ShopYTB feature at their sites. ShopYTB provides access to more than 600 stores, such as Wal-Mart, Target and Home Depot, where RTA customers can earn cash back on purchases.
He said YTB was also striving to help affiliates achieve full travel agent status through its e-campus. But teaching YTB website owners how to make a profit in a down economy "is still the challenge," he said.
As for improving recruitment, van Patten said YTB now hosts seminars to teach participants how to sell websites "based on the successes of our many profitable reps."
Meanwhile, terms of the California settlement required YTB to register with the state as a franchise business. YTB filed its application within a month after the settlement, but California has not acted on it, according to YTB's latest financials.
In addition, YTB was required to pay $1 million in penalties, costs and restitution. According to the financials, $750,000 has been paid.