UPDATED - NO ADVERTISING ON THIS BOARD - Warning about YTB (YourTravelBiz), Coastal Vacations and WorldVentures DreamTrips

• the company is losing more and more money year over year (but its principles are making millions).
  
• the average travel agent pays more than three times in fees as they earn in commissions
  
• the company makes twice as much from "selling travel agencies" as from selling travel
  

In its continuing review of advertising companies use to market their products and services, the Better Business Bureau challenges claims that appear to be misleading and publishes the results of its review. One of its most recent reviews was of the advertising of Your Travel Biz, also known as yourtravelbiznet.com and YTB Net.com, as well as various other names of individuals who are representatives of the company.

This company offers a marketing opportunity selling online travel agencies at several levels via a multi-marketing plan. Independent Marketing Representatives (IMRs) sell online agencies, enroll Referring Travel Agents (RTAs), and sponsor other representatives. They cannot sell travel, nor do they receive travel credentials. RTAs are required to pay $49.95 a month to maintain a travel website. They refer people to their own website to book travel and can earn commissions from travel booked through their personalized site or by direct referral.

According to the company, you reach maximum earning potential by developing three teams. The "First Team" is complete when three representatives have been personally sponsored and six online travel agencies activated. The IMR earns 50 percent commission from all sales. Once the First Team's requirements have been met, IMRs qualify to advance to the next level, the "Power Team." This team includes the first team of every representative in your Power Team. When one of that Power Team starts a Power Team, that team becomes a first generation "Dream Team" to the original IMR. This building can continue through six generations of Power Teams.

We consider this company's advertising to be misleading because of its website claims about the ease and ability to earn money using the company's methods and marketing techniques. One page offers the opportunity to earn bonuses such as a choice of vehicle valued at up to $50,000 and a $100,000 bonus.

The company also claims that travel agents will receive perks of upgrades, familiarization (fam) trips, discounts and "specials." Testimonials tell of free hotel upgrades and huge discounts obtained just by presenting travel agent credentials from the company.

We believe the earnings claims are exaggerated and we consider testimonials to be invalid as evidence of the truth of the company's advertising.

We believe this company may be engaged in a pyramid marketing plan because of their apparent emphasis on recruiting rather than selling travel. Those who buy into the company's team become legally responsible for the claims they make about their company, its product, and the business opportunities it offers. That is true even if the claims are presented in a company brochure or advertising flyer.

Card mills take 'agents' for a ride

By James Gilden | Special to the Tribune
December 9, 2007

The pitch is seductive and sophisticated.

Qualify for deeply discounted travel. Earn commissions on your own travel expenditures and on that of your friends and family. Build your own travel business with income from others you bring into the fold. Deduct your travel spending from your taxes. Do all of this for less than $500 up front and $50 per month.

Tens of thousands of people are giving it a whirl by buying travel agent credentials. Some do prosper, but many who got their credentials through these "card mills" will be out of the business in less than a year, according to documents from one company filed with the Securities and Exchange Commission.

The pitch is from a Wood River, Ill.-based company called YourTravelBiz.com, or YTB. The proposition, known as a multilevel marketing plan, is on the company's Web site and is used by the company's independent marketing representatives.

Whether it's soap or travel Web sites that are being marketed, the goal of multi-level marketing companies is to make commissions selling business opportunities to friends, family, even strangers.

In a video on its Web site, YTB urges prospective customers to get involved in the "$7 trillion" travel industry. For comparison, the total U.S. GDP in 2006 was about $13 trillion.

"It's a number that has been published," said J. Kim Sorensen, president and CEO of YTB Travel Network, when asked about the $7 trillion figure. He wasn't certain of its origin but believed it was from Forrester Research, the Cambridge, Mass-based travel research company.

"We didn't make that statement," said Henry Harteveldt, principal analyst for Forrester.

Ninety-four billion dollars is the number that PhocusWright, a Sherman, Conn.-based travel research firm last month estimated to be the total 2007 U.S. online market for leisure and unmanaged business travel, a bit more than one third of the total U.S. travel market, it said.

The YTB representatives who prosper earn most of their income from the sale of travel Web sites to other agents, not from the sale of travel itself. In 2006, YTB made 72 percent of its revenue from the sale of online travel stores and monthly fees and 15 percent from travel commissions. Another 11 percent comes from the sale of training programs and marketing materials and the rest (less than 2 percent) comes from franchise fees and "other."

"Plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited," the Federal Trade Commission says on its Web site (www.ftc.gov) in talking about multilevel marketing plans. "And when a plan collapses, most people -- except perhaps those at the very top of the pyramid -- lose their money."

The companies are under increased scrutiny from travel providers and travel agent organizations concerned about card mills. Having such a card is said to open the door to all sorts of travel perks and discounts, including free trips.

Travel agents, for instance, are routinely offered familiarization, or "FAM" trips, by travel suppliers who want agents to become familiar with their cruise line or hotel or destination and sell it to their clients.

Royal Caribbean Cruise Line last month severed its relationships with YTB, a similar organization called Joystar and another company Royal Caribbean would not identify. None of the agents affiliated with these companies can now book cruises on Royal Caribbean's brands, including Celebrity and Azamara.

"We don't sell RCCL [cruises] any more," said Sorensen. "It didn't have anything to do with FAM trips."

Sorensen said that YTB had put into place systems to control its agents' requests for FAM trips, funneling them through its central office and verifying that the agents were producing travel sales. He said he could not control what individual agents did on their own and blamed the industry for allowing travel agents to request FAM discounts.

On YTB's Web site, however, a promotional video says those who sign up with YTB can get FAM trips. The video cites a $2,635 11-day cruise that YTB members can get for $798.

As recently as Oct. 31, a person whom Sorensen identified as a rep talked on the YTB Web site about getting a $500 a night hotel in Prague, Czech Republic, for $150 using YTB travel agent credentials.

Most YTB agents had little or no commission on sales of travel in 2006, according to company documents filed with the SEC. At the end of 2006, YTB reported it had nearly 60,000 registered travel agents. For the year, it paid those agents about $4.9 million in travel commissions, or less than $82 per travel agent.

The turnover at YTB is significant. At the end of 2005, it had about 21,000 registered travel agents. In 2006, it added about 59,000 new ones, but at the end of 2006 it still had only about 60,000, a net gain of about 750 registered travel agents for the year. Nearly 97 percent of its travel agents lasted on average less than one year.

David Hewitt, a retired car salesman from Granbury, Texas, was one of them. After being approached by an acquaintance who was a YTB independent marketing representative, he decided to sign up to cash in on what he thought would be significant discounts on travel using his travel agent identification.

He paid his $500 and the $50 monthly fee for about three months.

"They pitch you can save your friends a lot of money ... and you can travel cheap yourself," Hewitt said. "It did not happen like that."

Hewitt made a plane reservation on the American Airlines Web site, not his own Web site because AA.com "was cheaper." Hewitt then traveled to his destination and presented his YTB-issued travel agent card to several hotels and requested a travel agent rate.

"They just snickered at me when they saw the ID card," he said.

After this happened on two other trips, he canceled his contract and requested a refund.

When it didn't come, he filed a complaint with the Better Business Bureau for eastern Missouri and southern Illinois, where the company is located (www.stlouis.bbb.org).

His was one of 31 complaints against YTB in the last 36 months, according to the BBB, 19 of which were related to refund or exchange issues.

He received his money a year later.

The International Airlines Travel Agent Association, a travel agent accreditation organization, recently rescinded the membership of YTB and three other travel agencies. That means those agencies can no longer issue IATAN-approved travel agent cards. (IATAN is part of the International Air Transport Association, or IATA.)

"We ... are working with IATA and our legal counsel to guarantee that we meet or exceed both IATA's regulations and our own high standards," Sorensen said in a statement.

• 73.4% of YTB's revenue comes from the MLM members' contributions
  
• 9.9% of YTB's revenue comes from the MLM members' training and marketing expenses
  
• only 14.5% of YTB revenue comes from actual travel commissions (no info as to what part of that is actually from travel by non-members
  
• All YTB MLM members together pay $103M in commissions and $14M in training and marketing expenses (total outlay to YTB, not counting other expenses): $117
  
• All YTB MLM members together received $80M in commissions for new MLM victims they brought in, and only $13M in travel commissions (total commissions received $93 versus investments of $117M, translating in a net loss for all YTM MLM members of at least $24M)
  

Illinois launches probe into YTB International travel company
By Tim Logan
ST. LOUIS POST-DISPATCH
08/08/2008

The pressure built Thursday on a Wood River-based travel company, even as thousands of its members gathered in St. Louis for a festive annual convention.

The Illinois Attorney General's Office said it has launched a probe into YTB International, which the top lawman in California earlier this week called "a gigantic pyramid scheme."

And the local chapter of the Better Business Bureau issued a report detailing complaints it has heard of misleading offers made by the company's sales reps.

The company has denied any wrongdoing.

The Illinois and Better Business Bureau probes are the latest signs of deeper scrutiny of the fast-growing company, which sells cruises, flights and online travel agencies — websites through which people can earn commissions selling cruises and flights — for $450 up front and $50 a month.

By the end of March, YTB had sold 139,000 of these agencies and had more than 340,000 sales reps, who pay nothing but earn a commission for each agent they sign up.

But few of those agents make money selling travel. Four out of five earned $39 or less last year, according to California Attorney General Jerry Brown, and 80 percent of the company's revenue comes from selling new agencies, not travel sales.

That, plus marketing campaigns which some say are misleading, led Brown to call the YTB a pyramid scheme and file a lawsuit seeking $25 million in damages.

Now Illinois is on the case as well.

"We have an open investigation," said Natalie Bauer, a spokeswoman for Attorney General Lisa Madigan. "We are in the process of contacting the California attorney general's office about their findings."

Bauer would not say when the Illinois probe began, but said it has been open for "a while." Her office has received 70 complaints about YTB since 2002.

Missouri Attorney General Jay Nixon does not have an active investigation, said spokesman Scott Holste, and has received just a handful of complaints.

The Better Business Bureau of Eastern Missouri and Southern Illinois also has been digging into YTB, said president Michelle Corey. It has received 90 complaints in the last three years, 40 in 2008, typically from people trying to get a refund of their $449 joining fee.

"For the most part, people are telling us they felt deceived by the company, primarily about their potential earnings," she said. "After getting involved in the program, paying up front and receiving their packet of information, what they received was different than what they were promised."

They also said YTB has an "unsatisfactory record" with the BBB due to "unresolved issues."

In a statement, company officials said they were unaware of any unresolved complaints with the Bureau and said they'll fight the California lawsuit.

"We are proud of our business model and how our operations are conducted in an ethical and transparent way," said chief executive Scott Tomer. "We also are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court."

At the convention, which runs through Saturday and is expected to draw 20,000 people to the America's Center, YTB reps said the complaints are misguided: Sour grapes from people who didn't put in the time it takes to succeed.

That's how Craig Smith sees it. The Houston resident joined YTB eight months ago and said he now earns more selling travel and signing up sales reps than he did in his old full-time job in telecommunications. YTB's product, he said, comes exactly as advertised.

"The websites work. They do what they're supposed to do. There's no scam in me selling you what it is that you said you wanted," Smith said. "If you don't go out and do anything with it, and you spent $500, how is that a scam?"

YTB Faces Legal Action in California for Illegal Pyramid Scheme
Aug 05, 2008
By: George Dooley

In a move that will be welcomed by many professional travel agents, California Attorney General Edmund G. Brown Jr. has sued YourTravelBiz.com for operating a gigantic pyramid scheme. The state alleges that YTB “recruited tens of thousands of members with deceptive claims that members could earn huge sums of money through its online travel agencies.” If found guilty, YTB could face fines and restitution as high as $25 million.

“YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else,” Attorney General Brown charged. “Today’s lawsuit seeks to shut down the company’s unlawful operation before more people are exploited by the scam.”

Brown charges the company, its affiliates and the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen with operating an “endless chain scheme,” an unlawful pyramid in which a person pays money for the chance to receive money by recruiting new members to join the pyramid.

Brown also charges the company with unfair business practices and false advertising practices including deceptive claims that members can earn millions of dollars with the company, operating without filing legally mandated documents with the attorney general and the Department of Corporations and selling an illegal travel discount program.

John Frenaye, a veteran agent and critic of YTB, said the state’s move was a “decisive win for travel agents and the travel industry” and could go a “long way to end the multilevel marketing challenge to the industry.” Last year, Frenaye collected more than 2,700 signatures from agents and suppliers opposing multilevel marketing.

In a statement, the attorney general said YourTravelBiz.com and its affiliates operate an illegal pyramid scheme that only benefits members if and when they find enough new members to join the scam. “Once enrolled, members who join the pyramid scheme earn compensation for each new person they enlist, regardless of whether they sell any travel. The company lures new members by offering huge income opportunities through online travel agencies, yet the typical person actually makes nothing selling travel.

“According to company records, there were over 200,000 members in 2007 who typically pay more than $1,000 per year—$449.95 to set up an 'online travel agency' with a monthly fee of $49.95. In 2007, only 38 percent of the company’s members made any travel commissions. For the minority of members who made any travel commission in 2007, the median income was $39—less than one month’s cost to keep the website. There are at least 139,000 of the company’s travel websites, all virtually identical, on the Internet.”

YourTravelBiz’s extensive marketing materials include videos of people driving Porsches and other luxury cars, holding $10,000 checks and claiming to be raking in millions of dollars in profits. The company advertises through its Website, www.ytb.com, and at conventions, workshops and nationwide sales meetings that have been held in California locations such as Los Angeles, Sacramento, San Francisco and San Diego.

Under California’s unfair business practices statute, the company is liable for $2,500 per violation of law, the statement said. “Attorney General Brown is suing YourTravelBiz.com to get a court order that: Bars the company from making false or misleading statements and assesses a civil penalty of at least $15,000,000 and at least $10,000,000 in restitution for Californians who were ripped off by the company.”

The Attorney General’s statement also noted that from August 6 through 10, “thousands of members are preparing to travel to St. Louis for a national convention to learn new techniques to recruit more victims into the illegal pyramid scheme. Last year at least 10,000 people attended a similar national conference.”

For more information on pyramid schemes visit: http://ag.ca.gov/cons...
Any consumers who believe they have been bilked by YTB should send a written complaint with copies of any supporting documentation to: Office of the Attorney General, Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244-2550. Or through an on-line complaint form: http://ag.ca.gov/cont....