YTB International

YTB International
Public
Industry Travel
Founded Alton, Illinois, U.S.
(January 2001)
Founder J. Lloyd “Coach” Tomer,
Scott Tomer and
Kim Sorensen
Headquarters Wood River, Illinois
Number of employees
 120 (2010)
Website www.ytbpulse.com

YTB International, known as YTB Global Travel, Your Travel Biz or YTB, operates a multi-level marketing business through owner-affiliate websites offering travel, excursions, and lodging. The company was founded in 2001 by J. Lloyd "Coach" Tomer, Scott Tomer and Kim Sorensen. The company is currently owned by U.S. businessman Sam Hathi of Jamraval, Inc. Other YTB subsidiaries include YTB Travel Network, Inc., Zamzuu, Inc., and REZconnect Technologies, Inc (2004–2009). YTB is based in Wood River, Illinois. International subsidiaries operate in the U.S., Puerto Rico, the Bahamas, Bermuda and Canada.[1]

Between 2006 and 2009 the company was the subject of several lawsuits and investigations in California, Illinois, and Rhode Island, alleging the company to be a pyramid scheme and usage of deceptive marketing.[2][3] Declining revenues following this led to the company's bankruptcy in 2013, after which it was purchased by Jamraval, Inc. and reorganized under the name YTB Global Travel.

Business model

YTB reports having thousands of representatives in the United States, Bermuda, the Bahamas and Canada who have sold over $2 billion in travel in the company's first 10 years.[4] In 2012, YTB was listed as the 52nd largest travel agency in Travel Weekly's yearly "Power List".[5]

YTB Global Travel Inc has two separate companies that operate under the YTB Global Travel Inc. corporate umbrella: YTB Travel Network and YTB Marketing. Representatives can participate in one or both programs.[6]

In YTB Travel Network, representatives participate by purchasing an "online travel agency" website from which they can be paid a sales commission. After paying a set up fee and monthly maintenance-fee, representatives can sell travel-packages online to others, as well as utilize the website for their own travel purposes.[6]

In YTB Marketing, representatives (referred to as "Independent Marketing Representative" or Reps) market YTB's representative programs to others. YTB does not charge a fee to participate in the marketing arm of YTB Global Travel. YTB pays a commission or referral fee and tiered compensation to those who participate in the Rep marketing program.[6]

History

J. Lloyd "Coach" Tomer, his son Scott Tomer, and Kim Sorensen launched YTB in 2001 in Alton, Illinois. Growth was slow until 2004, when YTB's creators bought controlling interest in a related company, REZconnect Technologies, increased their marketing budget, and aggressively recruited new members with videos of successful salespeople.[7][8][9] By years end, the company employed 23 employees with total travel sales reaching $20 million.

In 2007, Royal Caribbean stopped doing business with YTB, describing the company as a "card mill"; an industry term for a business that provides perks that are intended for a limited number of travel agents to the general public.[10]

In 2008 the company was sued by California Attorney General Jerry Brown. An out-of-court settlement required changes to the company's business model, and generated a decrease in membership attributed to bad publicity.[11][12] In late 2008, YTB laid off 17 employees, a move that was part of a reorganization.[13] In 2008 the company's revenues were $44.8 million.[14][15] YTB said its independent audit at the end of 2008 expressed "substantial doubt about our company's ability to continue as a going concern",[16] a sentiment the company itself later echoed.[17]

In 2009 the company was operating at a loss of $1.9 million for the first three months of the year. Revenue in that quarter dropped 49% to $21.8 million[16] and then to $18 million in the second quarter.[17] The company's paying members also declined substantially in number, from a high in April 2008 of 138,000 to 60,414 in mid-2009.[18] The decline in revenue led the company to sell several commercial properties it owned in 2009, including the company's Learjet.[19] That year YTB also sold RezConnect, by then its technology and booking arm, to two of RezConnect's officers. Under the terms of the sale, YTB would indemnify the new owners for any YTB-related liabilities.[20]

In 2011 the company sold its headquarters building and adjoining property for $7.6 million.[21] In October 2011, a newly formed company, Sixth Scott LLC began purchasing YTB Travel Network from YTB International.[22][23] The company was relaunched as First Alliance Travel one year later.[24]

On February 1, 2012 founder J. Kim Sorenson died at the age of 62.[25] In March 2012 the YTB announced a plan to merge with LTS Nutraceutical, another MLM firm. In May the company began a major restructuring, and stated that the President and CEO, Robert Van Patton, had submitted his resignation. In September YTB called off the merger, and announced that founder and chairman Scott Tomer was also resigning.[11][12][26]

On March 1, 2013 YTB International filed for Chapter 11 protection in federal court in St. Louis. The last quarterly earnings report the company filed was for the third quarter of 2011, although the company later announced that the report contained errors.[11][12][27]

On October 11, 2013 YTB completed the sale of its assets to a Chicago-based businessman Sam Hathi of Jamraval, Inc. "We believe the YTB franchise can be turned around and that it can regain the leadership position that it once held in the travel services industry," said Hathi in a statement. YTB has operated as YTB Global Travel since being acquired.[28]

Lawsuits

In August 2008 California Attorney General Jerry Brown sued the company for $25 million, alleging it to be a pyramid scheme, among other claims. The Illinois Better Business Bureau and Illinois Attorney General Lisa Madigan joined Brown in investigating the company.[29][30] Brown's lawsuit indicates that 45,000 sales reps earned an average of about $90 in 2007 and of their 200,000 total agents, some 125,000 earned nothing and 37,000 earned less than $39.[9] On May 14, 2009, California authorities settled their suit with YTB for $1 million. As part of the settlement, YTB agreed to restructure, possibly hastening a transition to a franchise system. That same day, Madigan filed a similar suit in Illinois.[31] Brown said the agreement would put an end to the $450, $50 per month unprofitable personalized websites.[16]

Around the same time, several former agents filed a class-action lawsuit alleging the company to be an illegal pyramid scheme. The lawsuit says that the company "claims to sell travel services, but said company's main business is inducing others to become travel agents".[32] YTB responded by stating that it intends to "vigorously defend the case,"[32] and the case was dismissed in July 2009 on the grounds that non-residents of Illinois could not pursue the matter under Illinois law.[33] Illinois Attorney General Lisa Madigan, after her office and the Illinois Better Business Bureau received more than 150 complaints about the company, partnered with Brown's office in his state's investigation of the company. The BBB indicated that 80% of YTB revenue came from new agent recruitment, with agents earning an average of $111 per year, almost $400 less than the initial $499 sign-up price.[34] In May 2011 it was announced that YTB had reached a settlement with the state of Illinois, paying $150,000 in restitution. No admission nor denial of guilt was made in the settlement.[35]

In 2007, YTB was also investigated for similar allegations in Rhode Island.[3]

In the defense of YTB, chief executive Scott Tomer said "We [are] are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court."[36]

References

  1. ↑ SEC Info - YTB International/Inc - 8-K - For 1/12/08 - EX-99.1
  2. ↑ Logan, Tim (July 31, 2009). "YTB sales rep meeting is here". St. Louis Post-Dispatch. Retrieved 2009-08-12.
  3. 1 2 George Dooley. "RI Agency Investigates YTB Business Model". Archived from the original on 2008-05-14.
  4. ↑ "SEC Info YTB International 2013". Yahoo Finance. Yahoo Finance. Retrieved 1 June 2014.
  5. ↑ Tobin, Rebecca. "Travel Weekly: Power List of top performing trael agencies". www.TravelWeekly.com. Travel Weekly. Retrieved June 25, 2012.
  6. 1 2 3 YTB International, YTB Global Travel. "YTB corporate information from company website". www.YTBPulse.com. YTB International. Retrieved 1 June 2014.
  7. ↑ "REZconnect Technologies, Inc., into Which YourTravelBiz.com, Inc. Had Previously Been Merged, Has Reincorporated in Delaware, Changed the Name of the Company to YTB International, Inc. and Now Has YTBL as Its New Trading Symbol". Business Wire. January 5, 2005.
  8. ↑ "REZCONNECT TECHNOLOGIES,Inc. MERGES WITH YTB TO CREATE MEGA TRAVEL ORGANIZATION". PRWeb.
  9. 1 2 Logan, Tim (August 31, 2008). "YTB sells dream of prosperity, but some say it is a nightmare". St. Louis Post-Dispatch.
  10. ↑ Jainchill, Johanna; Godwin, Nadine (15 October 2007). "Royal Caribbean throws 3 'card mills' overboard". Travel Weekly. Retrieved 10 August 2014.
  11. 1 2 3 Logan, Tim (1 March 2013). "Long slide lands YTB in bankruptcy court". St. Louis Post-Dispatch. Retrieved 28 May 2014.
  12. 1 2 3 Barr, Diana (5 March 2013). "YTB International files for Chapter 11 bankruptcy". St. Louis Business Journal. Retrieved 29 May 2014.
  13. ↑ "YTB cuts 17 positions". St. Louis Business Journal. August 29, 2008.
  14. ↑ PRNewswire-FirstCall (August 15, 2008). "YTB International Announces Financial Results for the Second Quarter of Fiscal 2008". Reuters. Retrieved 2009-07-18.
  15. ↑ "SEC Info: Annual Report". Retrieved 1 June 2014.
  16. 1 2 3 Lifsher, Marc (May 15, 2009). "California settles with Internet travel business it accused of running pyramid scheme". Los Angeles Times. Retrieved 2009-05-15.
  17. 1 2 Tritto, Christopher (August 7, 2009). "YTB loss widens, sales plummet". St. Louis Business Journal. Retrieved 2009-08-12.
  18. ↑ Logan, Tim (August 11, 2009). "Earnings". St. Louis Post-Dispatch. pp. Business, p. A10.
  19. ↑ Logan, Tim (2008-11-17), "YTB growth stalls in Q3, sells assets", Blog Zone, St. Louis Post-Dispatch
  20. ↑ Godwin, Nadine (July 9, 2009). "YTB sells RezConnect to executives". Travel Weekly. Retrieved 2009-07-18.
  21. ↑ Volkmann, Kelsey (25 March 2011). "YTB to sell Wood River headquarters for $7M". St. Louis Business Journal. Retrieved 29 May 2014.
  22. ↑ Jainchill, Johanna (2 November 2011). "Travel veteran Jeff Scott is YTB's new owner". Travel Weekly. Retrieved 10 August 2014.
  23. ↑ Jainchill, Johanna (27 October 2011). "YTB's travel operations purchased". Travel Weekly. Retrieved 10 August 2014.
  24. ↑ Rice, Kate (8 October 2012). "Company launches host agency with YTB assets". Travel Weekly. Retrieved 10 August 2014.
  25. ↑ "YTB Travel executive Kim Sorensen dies". Travel Weekly publication. Travel Weekly. Retrieved 2012-02-02.
  26. ↑ Barr, Diana (5 September 2012). "YTB calls off LTS merger, Chairman Scott Tomer resigns". St. Louis Business Journal. Retrieved 29 May 2014.
  27. ↑ SEC filing w.r.t. to Chapter 11 protection
  28. ↑ Brown, Lisa. "Chicago investor acquires YTB business". St Louis Biz Journals. Retrieved 11 February 2014.
  29. ↑ Steve Gonzalez. "YTB targeted in federal class action lawsuit". Madison County Record.
  30. ↑ Volkmann, Kelsey (5 August 2008). "Brown sues over alleged pyramid scheme". L.A. Biz (St. Louis Business Journal). Retrieved 28 May 2014.
  31. ↑ Logan, Tim (May 15, 2009), YTB settles with California, promises big changes, St. Louis Post-Dispatch, archived from the original on May 20, 2009, retrieved 2009-05-15
  32. 1 2 Kelsey Volkmann (August 11, 2008). Former agents sue YTB International. St. Louis Business Journal.
  33. ↑ Nadine Godwin (July 21, 2009). "Judge throws YTB complaint out of court". Travel Weekly.
  34. ↑ Kelsey Volkman (August 8, 2008). UPDATED: BBB received 90 complaints about YTB, Ill. AG received 70. St. Louis Business Journal.
  35. ↑ "YTB settles deceptive marketing charges by Illinois". StlToday.com. May 4, 2011.
  36. ↑ Logan, Tim (8 August 2008). "Travel company faces additional investigations Illinois and the local Better Business Bureau are also looking into YTB, which California is suing as a 'gigantic pyramid scheme.'". St. Louis Post-Dispatch.
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