Thoughts On The Issue At Hand

Before heading to New York with my kids for a pre-holiday long weekend, I wanted to fire off one last entry to somewhat address all the comments that have been made in the past few days. When I started this blog, it was with the intent of allowing everyone to have their say. Pro and con. It has worked well. If you care to disclose your name, you can. If you care to be anonymous, that is OK too. Everyone's opinion carries equal weight and is not edited, moderated, or blocked. It is all about speaking one's mind, right? And I want to thank everyone for their posts--even the ones with which I don't agree.

As everyone knows, a battle has been going on between "traditional" travel agents and the "MLM" travel agents. I want to state again, that this is not about YTB. It is about the model. Unfortunately (or fortunately) YTB is the loudest, largest, and most egregious of the MLM companies out there. Their RTAs are very vocal, and in my opinion, lacking in knowledge of the industry or business in general. This lack of knowledge has only served to fuel the fire and make a stronger position for the traditional agents.

On the traditional side, we have established a petition that has a VERY powerful message and we have been lobbying the industry for change--or at least for a review. To date, I think we have been very successful. In an incredible flash of good timing, RCI decided to terminate contracts. Shortly after that, Pilgrim Tours offered a statement regarding the MLM model and how they would no longer support it. Perrillo Tours issued a statement in support of the traditional agent and cited that 90% of their YTB bookings were for the agent themselves. Many representatives of suppliers, while not speaking FOR the suppliers, have signed the petition as well. And finally, IATAN has revoked the endorsement of 4 agencies--one of which is YTB.

While the RTAs are running around saying it is a misunderstanding and blessing me as if I had severe allergies, this is a very serious problem for them and they may not realize it.

In the most basic sense, their reputation has been tarnished when a leading supplier essentially fires them. It is further eroded when their "Sale-A-Thon" is not quite the success it should have been. And finally, what does that reputation look like when IATAN revokes their endorsement?

Many RTAs do not know the difference between CLIA and IATAN as is evidenced by some of the comments to this blog. But, that is OK, because the suppliers do know the difference. When a company uses the IATAN card as one of the largest enticements to buy into the opportunity and it is no longer available, it is an issue. I am amused that IATAN was so important that it was on EVERY sales presentation and training session by YTB before last week. Work hard, and get the IATAN card and you too can travel like an insider. Now all of a sudden it really does not matter. Other than cruise lines, most suppliers (hotels, resorts, tour operators, car rental agencies, and airlines) seek an IATAN number to honor any bookings (and subsequently commissions) and any discounted travel. If I were a YTB RTA, I would be pretty ticked off right about now.

There will be more isses to deal with down the road. The Attorney General in Rhode Island is waiting on a report from the Department of Business Regulation. Apparently YTB has not complied with the laws of the State. Again, this will be yet another black eye.

There will be an investigative report tonight on WBAL-TV in Baltimore about YTB and one of the rogue agents that took $15,000 from a group and canceled their reservations. The interesting part is that YTB corporate refuses to talk to the reporter.

The model is a bad one for the consumers. Travel is NOT a product. It is an experience and the MLM model does not recognize that. They claim that Mary Kay and Tupperware are MLM--true, but they sell a product. The product they sell is also considerably less expensive than travel. Why would a consumer fork over thousands of dollars to an unknown website? With Orbitz, Travelocity or Expedia, you know the brand and there is recourse when something goes awry. When you book with a traditional agent (home based or store based) there is recourse and you know where to go for help. With YTB you are not booking with a known company. You are booking with a person that was able to afford $500 to hopefully buy some perks and make a lot of money. And when there is a problem, YTB (corporate) can conveniently say that they are independent and we cannot control them. It is obvious from their websites that they have no desire to service the consumer or offer any help. Most of the sites do not have any telephone numbers or email contact information and the "HELP" page directs the consumer to call the vendor directly. Sorry Charlie--it does not work like that when someone just forked over several hundred or several thousand dollars!

The vendors are getting a bum deal on this too. Sure there is incremental revenue from the MLM agencies. RCI apparently tossed away $23M of it. They took a look and figured out what was "good business" and what was "bad business". Good business shows that their agents are actively selling the experience to someone other than themselves. Good business shows a modicum of professionalism. Good business does not make your field reps groan when good business approaches them. Good business rewards you for FAMS and discounted travel with full fare clients--not more FAMS and discounted travel. Good business will treat the customer as a mutual customer and treat them as you would yourselves. Good business is interested in learning about the industry--the perks are pretty far down the line. Good business sells travel--only travel

Bad business on the other hand--well, they don't!

So what does my crystal ball show? It shows a drawn out battle. I think finally, the traditional agents are a cohesive group with a cohesive message. I think the suppliers and associations are looking at this very carefully. They will decide if they wish to align themselves with good business or bad. I suspect there will be more suppliers that shun the MLM model. There will be no rush to jump on this bandwagon, but I bet they are all looking at the numbers as I type!

The YTB financial statement just released indicated $5.5M in travel commissions and $28.6M in website sales and rentals. Now tell me what business they are in?

But on that commission number, that is probably representative of $55M to $60M in sales for the quarter. If all 4 quarters are as strong as this they may be on target to reach the "verified" sales they claimed last year. But I challenge that $240M a year in sales for 121,000 agents is a pretty poor showing. When I look at the petition, I see some big names on there and I venture to guess that just those 2600+ names represent well over $1BILLION in sales.

$240M/121,000 Versus $1B/2600---now you decide which is good business and which is the bad?

Now--please feel free to comment away--there is no moderation here and your opinions deserve to be heard and not edited down.