This was just published by Travel Research Online and I think it is an important point of view that needs to be shared:
To the trade media I ask are you listening? Do you agree? Will you act? Agents reading this--please pass the message along!Protecting Professionalism
This week's announcement that the California Attorney General's office was filing suit against YTB is now being followed on by an investigation by the Illinois Attorney General's office. It is welcome news that the states are finally taking action against the card mills and MLM companies that have turned an untrained evangelical horde onto the streets claiming to be travel professionals.
The battle is far from over. There is always another permutation of these companies flying under the radar. But what is remarkable in this particular instance is the way in which the travel media at large failed to take up the cry. True, Royal Caribbean and a few other suppliers cut card mills out of their rosters, but where was the travel media? By and large they actually became hives for MLM "travel agents". The bulletin boards and the online portals of major travel media outlets became at best a place where the issue was debated in an almost embarrassing fashion or at their worst where the MLM'ers actually held sway. YTB was placed on a "power list" by virtue of its "sales volume" without any serious journalistic questioning of its business methods or its impact on professionalism. I suspect that an analysis of the ranks of the circulation, electronic and print, of many of the media outlets would reveal an uncomfortably high percentage of pseudo-agents.
It is time for the media of the travel industry to take a real editorial stand on this issue, to get off the fence and denounce the business practices of companies that crank out travel agents in an assembly line fashion with no training and no real passion for the business. While the efforts of suppliers are appreciated, their concerns are not the same as that of retail travel professionals. It is the media that claims to be the voice of the retail travel agent and it is the media that can best amplify the efforts of travel agents who have taken a stand against the card mills and MLMs.
Richard Earls
Publisher
Travel Research Online
It is time for the industry to take a hard stand against these firms. Travel Weekly has contributed to success of YTB and the other MLMs. More important, the suppliers have not taken a stand and cut them off because of greed. Although the industry is changing and the economy is poor, to allow MLMs to refer the product and pay them full commission is a slap in the face to us in the travel agent profession. If the suppliers don't act, maybe we should and do a boycott of the suppliers that have direct links on the MLM (especially YTB's) websites. Are you listening Colette, Apple, Pleasant Holidays, Travel Impressions, Carnival, Princess, etc? There are other suppliers that compete with you! We have a choice.
ReplyDeleteOff topic, has there been any news on the unveiling of the mass of foam? I can't find a single thing about it. Also, Doug says there are 18,000 at the convention that are in training. Don't you find that hard to believe? I do. Check out his dorky picture with Candi May. Naturally he's all sunshine over this lawsuit and the investigation and it will only make YTB bigger and stronger. Doh!
The actual YTB attendance is WAY lower. They were all encouraged to bring their family and friends so when someone shows up with a wife and two kids that is 4 people.
ReplyDeleteIf I had to venture a guess, there may be 6500 to 7500 people who have signed an agreement with YTB. Since the convention is bare bones--no entertainment, food, activities, etc. it costs nothign to allow guests to watch and it makes it look a lot fuller than it is!
Martha-I agree with you 100%. Since RCCL took a stand against the MLM's they have my business unless a client specifically requests Carnival or Princess, same with Perillo Tours. I use them because I like them and their position on the MLM's.
ReplyDeleteIMO, the suppliers need to do something about the MLM's using the fams as a vacation for themselves and their families. Same with agent rates available to do site inspections. One not to be mentioned YTB agent was going to take her whole family kids included to Secrets when they announced the agent rates.
I am glad CLIA is finally making it harder to get a CLIA card. However, that's like closing the barn door after the horse gets out. CLIA fed the monster in the first place.
John - This is what Doug says: "While everyone here is aware of the carefully orchestrated events that started this week in an attempt to dampen our National Convention, after a couple of days of looking around at the crowds here (some 18,000 so far just for Training) the mood is extremely upbeat."
ReplyDeleteNotice that he says training. All that man needs is some bright red rouge on his cheeks and a plastic bubble nose to complete his persona.
I am not sure what you are getting at Martha, but "training" is code word for recruiting class. And yes they will likely have a lot of guests there because they can whoop it all up and put on the dog and pony show that all is well in Oz.
ReplyDeleteWhat I was getting at is that Doug is saying there are 18,000 there in training. You know and I know that's a bald faced lie. If they really think they are going to recruit anyone else with all of the recent developments, they should take a reality class. It's a done deal and YTB will probably be gone in less than 3 months. Doug may have to find a job or move on to the next scam MLM. From the looks of him in the picture, he should hit the Trim & Tone gym when he gets home.
ReplyDeleteNow about the foam. Anything?
Martha, So what will you say on Nov 8 (3 months from now)when YTB is not gone?
ReplyDeleteAgain, I am sure John can fill you in on what happened with the investigation in Florida a few years back. It is important to remember that YTB as a company hasn't broken any rules or violated any laws. There are REPS that I am sure have, and they will be held accountable and should be, but it will be determined, like it was in Florida, that the company itself has done nothing wrong.
Read the suit, then go and read official YTB documents and tell me where YTB does ANYTHING claimed in the suit.
There are so many misrepresentations in that suit it isn't even funny.
The fact that in several spots it goes on and on about charging INITIAL fees of over $500. We have had this discussion before whether right or not, ( I know Kate mentions bizop laws all the time)
Truth is to become an RTA you pay 449.95 and the first month of 49.95 up front (LESS THAN 500) I don't care if it is a penny less, it is still less. Then, with no contract to sign an RTA can get out before the next 49.95 is paid with no questions asked. So, there is NO REQUIREMENT OF 500. That, I believe will be the main reason why the suit will be tossed.
No, for misleading marketing that is also not on YTB but certain people, and I am sure people will be named and and found liable.
But, the chips will fall where they may and I am confident that YTB will still be here long after "less than 3 months"
None of us are attorneys. However, in discovery, I suspect that some incriminating stuff will come out. In Florida, they did not have a threatened lawsuit from their former in house attorney. That is a smoking gun to me.
ReplyDeleteThere will be some stuff that come out. Insider trading, self dealing to name a few.
See, YTB did not disclose the investigation in its SEC filings (required by LAW) and the principles sold a considerable amount of stock during the 18 months. Insider trading.
The beauty of a civil action is that you do not need to prove anything beyond a reasonable doubt. It is by a preponderance of the evidence. And to be honest, there is a LOT of evidence. Give me about an hour and I can probably come up with 60 instances of Reps making false claims. ANd it is incumbent on YTB to control the message.
I suspect that the civil suit could lead the way to a criminal one against the 4 named individuals and the top directors
I'd have to say this Josh, with YTB's current reputation and with everything else that has happened, it will collapse because recruiting is the number one money maker for the company. With no new recruits coming in, no money and so bankrupt. 14.5% of money from travel commissions will not sustain this program.
ReplyDeleteShould they hang around longer than 3 months, then I'll be wrong. It's just a matter of time though. I wonder if they could turn that statue into packing peanuts and get some money back?
John,
ReplyDeleteHere is where you are wrong....it is not incumbant on YTB to control the message as long as they have taken the necessary "precautions" to prevent it.
Also, YTB was not under investigation from CA for 18 months, they were having discussions for 18 months that reached a standstill so the CA AG decided to press forward.
It is not required by the SEC for YTB to constantly report that they are constantly having discussions. Remember as far as YTB is concerned, it thought the issue with CA was fine following the JAN 2007 decision to have the 2500 requirement in California.
I do understand the difference between civil law and criminal with respect to the amount of doubt, proof, etc. and with that said, I believe after reading the suit again, that there is a single item in the suit that is true.
And again, I am not denying that REPS have done some stupid things, but frankly it doesn't fall on YTB"s shoulders.
With that said, I feel YTB needs to come out of the convention demanding that RTAs and REPS in YTB who see anything misleading out there as far as presentations, or ads, to report those often. That will, IMO< solve the problemn.
With respect to the insider trading claim you made, that is a significant stretch considering many of the principles were also buying a ton of stock, and in some cases when it was high.
I know you have the links to who bought what, go and look right after the split how much was purchased at 5, 6 and 7 bucks a share.
Also, go back to last spring whent the stock went trhough the roof, go look at how much stocj was purchase by principles at a price over $10 share.
Martha, you are assuming that recruiting will shut off simply because there is a pending lawsuit. I don't believe that is the case as I don't believe the suit has merit.
ReplyDeleteSure, recruiting will be tougher as I always encourage prospects to do their due dilligence and I am certain they will see the goings on of this week. But, I will happily show them the actual suit and how EVERYTHING in it (suit) is, oddly enough, misleading.
Josh, we are closer than you think. The SEC requires them to disclose any material events that might impact their business. The investigation/discussion or whatever you want to call it is material. Apparently so--look how it has impacted them in the last three days.
ReplyDeleteYTB does need to take the necessary precautions to prevent it and that would normally be a big item. But they have not. There is evidence that they did not. There is evidence that they were told they were in violation of numerous laws and they chose to ignore those allegations. This is all evidence that will be presented against YTB.
And when you are presented with such hard copy evidence, it is very difficult to refute.
A funny thing about ANY legal action. Merit or no merit, the ultimate decision is with a judge or a jury.
ReplyDeleteInnocent people are convicted and crooks get off all the time.
You go to traffic court to fight a speeding ticket and you could be guilty and get off or you could be innocent and told tough shit.
Tell me how you know that YTB was told that they were in violation. And who told them? You?
ReplyDeleteWell, I would agree that disclosure of material events is required, but a multimonth discussion may not have at the time seemed pertinent. And, certainly, following the suit, YTB disclosed that, obviously.
John, I musy admit, that at least with you, your tone of discussion, with me and a few others is at least civil as of late.
The useless bickering and attacks from both sides really does nothing for the discussion.
I know I am not going to change your mind, but I can say from some other life experiences I understand your frustration.
I will also say, that what I did, when that occurred, is let the chips fall, and those not qualified were weeded out. Those, that I initially thought were no qualified proved that they could stay but doing what they needed to do to succeed professionally.
That is what I wish you would do.
If YTB RTAs are so bad then those that are will eventually just go away. Those that want to be successful and professional in whatever business model they choose, should stay.
YTB is the first and only MLM I have ever been in and I just don't understand why people have such a problem with that model.
There are bad apples in every bunch. Period.
I will likely not post again tonight.
Josh---for the answer to your first few questions you will need to tune in on Monday and I will lay it out for you. Actually it is already laid out and scheduled so you will have to wait.
ReplyDeleteOf course YTB acknowledged it after it was served. It was in every paper across the country since it was the LARGEST SUIT EVER BROUGHT AGAINST A MLM COMPANY IN ANY INDUSTRY. Please re-read that. This is big news and if Jerry felt he did not have a very solid case, I am sure he would have sued for much less.
As for disclosing it earlier..of course YTB did not feel it was pertinent. If it was disclosed it would have killed recruiting in CA--one of their top states. I believe it was criminal that they did not disclose that information. Not saying a press release, but a note in an annual or quarterly filing would have been fine. But no they continued on business as normal with Coach pulling levers behind the green curtain.
You have said that recruiting will not be hurt that much. Exactly how do you pitch someone on an RTA position right now? How do you think you pitch them on a franchise when disclosure is required by law? I know it is only $500 but with the LARGEST SUIT EVER BROUGHT AGAINST A MLM COMPANY IN ANY INDUSTRY looming over the head of YTB, I am more apt to not spend it, or to give it to Traverus or World Ventures.
This is from marketwave newsletter # 98
ReplyDeleteBut here's what concerns me most. This legal tumor is firmly embedded within YTB's compensation plan, where the large majority of money is made, by both the company and distributors, not by booking travel, but by enrolling other travel bookers. Basically, the company makes a substantial profit from, and pays the majority of commissions on, the sale of the website the travel is booked through, not from the actual sale of travel. And yes, based on much legal precedent, this is something to be avoided.
Bobby,
ReplyDeleteProfit is the key word, as YTB as a company makes about .001% from the sale of a website. The comp plan pays out 99.999% of that 449.95
Josh,
ReplyDeleteProve it please. Show me on the annual report.
Josh, most of the income for YTB is made by selling the dream. That is the problem. They make more money overall selling the dream and the support for that dream (books, brochures, DVD's, etc.) than by actually selling travel. That is the problem. Look at the reports.
ReplyDeleteJosh, the other day you said that no one would tell someone that they were going to get 60% of the sale price with YTB. You don't have to watch this whole video but spent at least sometime until you hear him talk about the commission. Yep -- 60% of everything you sell.
ReplyDeletehttp://tinyurl.com/6de3zg
YTB will still be around 3 months from now. The legal system in this country takes much longer than that to do its job.
ReplyDeleteThe fact that the 18 months of discussions was not disclosed could easily lead to insider trading charges. We'll have to see if the SEC chooses to press charges.
Josh - Please provide the proof you have that insiders were buying stock at those prices. I have reveiwed every single Form 4 report for YTB on the sec.gov website and I can't seem to find those reports. Other than 1 open market purchase by Lou Brock, all the other acquisitions were actually grants of restricted stock at no cost, or the excercise of options at prices substantially below market. Those Form 4 reports date back to 2005. So, since I have the SEC forms as my proof, I call bullshit on your claim that they were buying all that stock at the prices you claim.
Regarding your statement about the 99.999% of the sign-up fees being paid out, that is hard to determine from the 10K for 2007. What it does show is that YTB received $103 million in fees for sales of websites and monthly fees. It in turn paid out $80 million in marketing commissions. Thus, the profit on selling the opportunity and renting travel sits created a profit of $23 million for the company for 2007. On the other hand, actual travel sales resulted in $20.5 million in commissions, of which $13.5 million was paid out to RTAs. So, for a company serious about selling travel, the profits from travel sites was more than 3 times the profit from travel sales.
Josh, I really think you should stop dring the Kool-Aid and go read the actual financial reports filed by the company. They are quite illuminating. Of course, they should have been more illuminating regarding the "talks" with the CA AG, but like I said, we'll see how the SEC handles that.
First of all, I never said that I KNEW that principles were BUYING at those prices, I asked for people to go check. I do apologize if it seemed to indicate otherwise. Also, did the SEC statements show that the principles were selling off in big numbers at those times?
ReplyDeleteI do know that someone was buying as that is how the price kept going up.
As to the second point regarding the comp plan....this was discussed right here on this blog a few months ago.
I went back to May to search and found this post......
Milton said...
I don't know why everyone has their panties in a bunch about the fact that the bulk of YTB's revenue comes from selling websites, and not from the sale of travel. This is a comment from one of John's earlier posts:
"Here's how the comp plan works. In this example, the Rep has sponsored only one person into their Power Team, and the Power Team has grown to 100 RTAs. Commissions and bonuses are paid through the 6th level Dream Team as follows:
$50 direct sale commission for the personally sponsored RTA
$5,000 in Power Team bonuses for all RTAs in the Power team
$2,500 -- 50% match to sponsor
$16,000 for 16 leadership bonuses
$10,000 Dream Bonus
$3,000 1st level Dream Team commission
$1,500 -- 50% match to that person's sponsor
$2,000 2nd level DT commission
$1,000 -- 50% match to that person's sponsor
$1,000 3rd level DT commission
$500 -- 50% match to that person's sponsor
$500 4th level DT commission
$250 -- 50% match to that person's sponsor
$500 5th level DT commission
$250 -- 50% match to that person's sponsor
$500 6th level DT commission
$250 -- 50% match to that person's sponsor
Grand total paid out in commissions and bonuses from the sale of websites: $44,800
Total revenue from 100 RTAs: $44,995
Percentage of revenue paid out in sales commissions and bonuses from the sale of websites: 99.56661%
Percentage of revenue retained by YTB from the sale of websites: 0.0043339%
Therefore, for every 100 people that buy a website, YTB nets only $195 ($1.95 pp), because everybody is on somebody's First Team, Power Team, and Dream Team (levels 1 through 6)!
This proves that YTB makes virtually no money from the sale of websites. Nearly all the money received from the sale of websites is contributed back into the marketing budget via commissions, bonuses, and matches. They have no choice but to sell travel in order to survive. Therefore, they must have as many websites out there as they can. The more websites, the more travel sales. The more travel sales, the more retainable profit for YTB. That's stated right in the 10k."
The 10k actually shows that YTB received $103 million in fees for sales of websites and monthly fees. It in turn paid out $80 million in marketing commissions. Thus, the profit on selling the opportunity and renting travel sits created a profit of $23 million for the company for 2007.
ReplyDeleteIf what you state is true, then the $23 million in profit would be MUCH closer to $0.
How do you explain the difference?
Joe,
ReplyDeletethe difference is is that the comp plan wouldn't pay out immediately.
For example. If Joe schmo signs up in 2007 and pays the 449.95 and pays say 6 months of 49.95, that money is paid to YTB, therefore they have received it.
Lets say Joe is eventually going to earn the 10,000 bonus for having 100 in his power team.
If he doesn't get there in 2007 then YTB still has that 10,000.
With it being a fluid situation and new people becoming RTAs everyday, there you can see how YTB from an each year reporting standpoint would have more coming in.
Josh--makes no difference on the timing as there was pre-received money on the front end. Look at all of the filings and they are all very similar and nowhere near the numbers you are quoting
ReplyDeleteThe timing makes all the difference John...use logic please.
ReplyDeleteIf 1000 new RTAS come in in one calendar year and even if they are all going to earn the 10,000 bonus in say 18 months, it could be 2 full years of YTB collecting the initial 449 and the 50 per month before paying out all of those bonuses. So timing is a huge issue.
Josh,
ReplyDeleteIn other words, YTB's profit will EVENTUALLY be $0 as they will give all that money back to the reps. Meanwhile, they aren't spending that money? Its banked and earmarked so that when the reps are ready, the money will be there to pay them? Coach and the others aren't using it to buy jets, mansions, and to live the good life?
OK Josh you are right.
ReplyDeleteWill you please stop now?
Joe,
ReplyDeletewell from the marketing side, in a sense...yes.. the ultimate would be for there to be zero profit from the comp plan. But, since it is all due to how it plays out, then it would never show that way, but if you look back to the past years the spread has decreased.
And to John,
If I tell you that you are right, will you stop your crusade of trying to take away my income?
Josh, yes, the insiders were selling significant numbers of shares during that time frame. Go look at the filings for yourself. That is why I suggested they may be subject to insider trading charges. That's up to the SEC to decide.
ReplyDeleteI'll concede that perhaps 99.something% of the initial $449 goes back as incentives. However, none of the 49.95/month does. That's the explanation for the $23 million difference. That's how YTB makes its money. Not from the sale of the opportunity to rent a website, but on the actual rental payments themselves.
Finally, if you are really so interested in selling travel rather than making money on recruiting, why not go to a host agency that will give you a 33% raise (80/20 split vs. 60/40) and not charge you for essentially the same website? It is really stupid to give all that extra money to YTB, when it could be in your pocket instead.
STeve,
ReplyDeleteappreciate the concession but lets talk about the 49.95 as well.
RTAs in their power team get a 4% residual income \on that 49.95, dream team 1 and 2 also 4%, 3,4,5,6 all get 2% and don't forget about the 50% match. I don't have the energy right now to figure it out but I believe that $43 of the 50 goes back out in the comp plan as well. YTB retains 14% and as I am sure you are aware there are expenses associated with running a website.
With respect to why not a host. Where I am interested in selling travel, I also understand the financial benefit of leveraging my efforts.
I have posted in the past a 6 month chart of my 10% overrides. Granted it was only 2300 but that will continue to grow as my power team grows. That, to me, is where the benefit of building a SALES TEAM comes from.
And that has proven that the two companies are not separate as YTB likes to indicate.
ReplyDeleteRTAs sell travel and it is one company. They pay for it.
RTAs do not have power teams. Reps have power teams and that is the other company.
So because of the efforts of one company, the reps of another are benefitting.
Co mingle co-mingle. This is a perfect example of YTB using the two buisesses to their advantage on one side of the mouth and saving their ass on the other.
As an RTA I sell travel. I paid 449.95 for my booking site and 49.95 to maintain it.
ReplyDeleteAs a REP, i have brought new RTAs to my RTA business. That cost me nothing! But, my efforts have been rewarded by earning the 10% override. One person---2 hats.
Josh--don't you need to have a minimum of 6 to begin to earn that override?
ReplyDeleteAnd again, as a REP you earn off the efforts of the RTA.
The companies are NOT separate!
That override is for power team leaders in the REP side.
ReplyDeleteJosh that is what I am saying. This is NOT two companies and this policy is allowing Reps to earn off of RTAs work. If you recruited nothing but RTAs and they did not recruit. You could earn a 10% override on their travel sales even though you yourself are not a RTA and are not selling travel.
ReplyDeleteDoes Ford award bonuses to it's people based on GM production?
Does Ford award bonuses to its salespeople based on Lincoln, Jaguar or Land Rover production?