More Independent Views

I just discovered a somewhat dated post in another blog that does a good job analyzing YTB. And the blogger posted a recent update as well.

This guy is not in YTB, he is not in the travel business. He just took a look at the opportunity for what it was worth and commented on his findings.

No spin from either side here. What do you think?

Is YTB About To File For Bankruptcy Protection?

I am not willing to bet the farm on this but after receiving two emails from different sources, reading a lot of commentary on different blogs and forums, and taking some time to think it through, I agree that there is a good chance that YTB might consider filing for bankruptcy protection prior to the end of the year. Most likely in the form of a Chapter 7 filing.

It is painfully obvious, even to the casual observer, that they are really struggling with cash flow, as well as legal issues. In the last month, they have:

• Tried to sell the plane three times (at a loss)
  
• Sold off the lion's share of their headquarters land
• Sold off an office building including furnishings (at a loss)
• Reduced the price to join the scheme by 50%
• Offered ridiculous incentives for existing Reps to recruit more people
• Pre-selling 2009 Convention tickets at a discount to raise quick cash
  

In addition, they were unable to have the Class Action suits dismissed as hoped in the December 8, 2009 Status Hearing. And speaking of hearings, there is another one with the Attorney General scheduled for January 5, 2009.

YTB has been in full out reactive mode for some time now. They are desperately trying to prove to the authorities that they are legal. They have added a new booking engine, they are adding more product (potions and lotions) to their RTA sites. All of these moves are desperate attempts to bring the percentage of non-recruiting revenue up to an acceptable level to appease the Attorney General. And no one really has missed that nuance.

Here is how I predict it plays out--YTB has sold a lot of assets and the proceeds from the assets are likely now no longer assets of YTB, Inc.. The economy is tough despite Coach's proclamation that YTB is recessionproof. The Attorney General is looking to "shut down" YTB and the plaintiffs on the Class Action suits are looking for money. Well, YTB all of a sudden "succumbs" to the economy and files a Chapter 7 liquidation bankruptcy. All of the stock is worthless (did anyone notice the large sell offs the past week?). So a trustee comes in to sell the remaining few assets--remember the valuable ones have already been sold. They liquidate what they can to pay off the top tier creditors. The RTAs and Reps are last on the list. The Attorney General realizes that YTB is shut down and is satisfied and may drop the case. The Class Action suits will need to determine if they have the time, will, and money to pursue a judgment against the individuals since the company is no longer an ongoing concern (a concern brought up several times in the 10-Q filing by their own accounting firm). The Attorney General also needs to make the decision to continue to pursue the principles as well as the Reps that will be names as Does 1 to 100..

Meanwhile. YTB management will look like the poor victims of a poor economy. They will profess that they tried everything--selling assets, decreasing the costs, giving those that want to quit free months, all for the "benefit" of the Reps and RTAs. The Reps and RTAs will buy into this story (as they do with any story told from Wood River) and laud them as heroes. The Reps and RTAs will then re-group and some may stay in travel with a legitimate host, others (most) will simply move onto the next get rich quick pyramid scheme they see. And the three musketeers? They already have their hotel reservations for the 2009 Snake Oil Convention in Vegas!

More Financial Woes For YTB

When it rains it pours. Directors quitting, stock sliding, RTAs fleeing, and an Attorney General that is hell bent on proving his point. And that is only the tip of the iceberg.

Last month, we posted about the only source of funding for YTB being investigated for improper loans and unsound banking practices. Well, it seems that Meridien Bank, whose owners represent 22% of YTB's Board of Directors, also don't like to play by the rules. The bank was closed yesterday morning by the Federal Government and taken into receivership.

Sure times are tough for banks, but Meridien was given ample warning to comply with federal regulations but apparently they were either a little too late, or just did not want to. Thankfully, their depositor's money is safe because the FDIC has taken the reins before the unsound practices could continue.

According to the St. Louis Post Dispatch, in a recent SEC filing, YTB said it can draw "no further amounts under that loan," and that it has no other credit available.

With a market cap that is dwindling each day, no access to credit, $225M in pending lawsuits, not many (if any) sources will be willing to lend any capital. What is next? Will the FDIC begin to foreclose on the new Headquarters?

And how long will the bank's principal's remain on the Board? Will Clay Winfield and Tim Kaiser feel the same heat that Burt Saunders currently is and undoubtedly the same heat that John Simmons did? Well, at least Simmons may get a nice house out of his deal.

Is A Travel MLM Really Such A Bad Idea?

Traditional TA’s have taken a lot of heat for our anti-mlm stand. But it appears that there are several other well educated, intelligent people outside the travel industry who agree that travel and mlms are a bad mix as well. In fact, Robert Fitzgerald has dedicated the majority of his career investigating the mlm model, and the horrible impact it has had on our society.

In his book “False Profits” FitzPatrick examines the persuasion techniques of these mlm recruiters, and devastating effects of mlm addiction. We caught up with Mr. FitzPatrick to get his take on the travel mlm model, and the effects that mlms have had on other industries. We are also trying to understand why so many YTBers are so defensive of YTB, despite the fact that over 80% receive zero income. Here is what Mr. Fitzgerald had to say. I wonder if Dr Seligman would like to respond…

“ My book, False Profits, is all about the power of these schemes to lure, seduce and persuade. I boil it down to their ability to manipulate beliefs and values that we treasure. Financial independence, freedom, individuality, a higher purpose for work, a destiny of better times, is part of a supportive community of "winners." In American we tend to equate wealth with goodness. So, when a scheme promises wealth it is like promising salvation, a validation for living. Many of us harbor deep seated longings for wealth and independence and are also deeply frustrated and disappointed that we have not achieved it. MLM unleashes these desperate hopes, frustrations and longings. As you see, it is a shameless manipulation. MLM goes after your very soul. It does indeed have the power of a cult. It uses many techniques -- repetition of aphorisms, strong hierarchical leadership, bombardment with recognition, a phony "community" and a promise of financial salvation, and most of all strict control over thinking and behavior -- that are classic brain washing and cult tactics.But it all starts with our own longings, hopes and beliefs. MLM is an American invention. It taps into special America values and beliefs. As these values and beliefs are spread worldwide in a global market economy, MLM is right there along with them to do its work of exploiting and manipulation. It is like our dark shadow.As you see, it took me a whole book to fully address this "mystery." It is indeed mysterious. But once you examine the claims, promises and techniques used by MLM and understand the beliefs, feelings, hopes and values that are so common among us, the reactions of people are more understandable.What we are speaking about, then, is a terrible kind of fraud. This fraud, like all frauds, steals money. It does so by deception, like all frauds do. But, more importantly, it also grossly manipulates people's hopes and dreams. It steals time and energy and its exploits a person's closest relationships, family, friends, and neighbors. So, it can not only steal money but literally destroy lives.This is, therefore, no ordinary scam. It is a virus that can negatively affect entire industries and communities and have very long term negative effects on people's lives and financial conditions. We talk with victims frequently who attribute their divorces, bankruptcies, family strife and loss of friends to MLM. I have been in two court cases where people committed suicide after being ruined not just financially and but socially by their MLM involvement.”

It's not just that travel & mlms are a bad mix, mlms and anything can be a bad mix when the people who get involved don't understand that they may not be the one driving the cocaine white bently.

Aloha ATA

Well, since no one had any answers as to how the MLM crowd was responding to the Aloha issues, ATA apparently has decided to give them a second chance.

In a statement, ATA has said:

ATA Airlines has discontinued all operations and cancelled all current and future flights. Following the loss of a key contract for our military charter business, it became impossible for ATA to continue operations. Unfortunately, we were not in a position to provide our customers or others with advance notice. We apologize for the disruption caused by the sudden shutdown of ATA and regret the impact on passengers, employees, suppliers, and other parties. ATA customers should seek alternative arrangements for current and future travel.

So, again, I know what the traditional travel agents are doing this morning. I also know what the online biggies are also doing. The question remains, what is YTB and the other MLMs doing about customer service. With almost a half billion dollars in reported sales, certainly some of your customers are impacted.

What is the answer? Call YTB HQ? Go to my website? Or is it that it is not your problem because you are just a privately branded Travelocity site and it is their problem? Welcome to the realities of being a travel agent folks---referring or otherwise!