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."
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.
To contact the reporter who wrote this article, send e-mail
to Nadine Godwin at [email protected].