| Type | Public (OTCBB: YTBLA) |
|---|---|
| Industry | Travel |
| Founded | Alton, Illinois, U.S. (January 2001) |
| Founder(s) | J. Lloyd “Coach” Tomer, Scott Tomer and Kim Sorensen |
| Headquarters | Wood River, Illinois |
| Employees | 300 (2008) |
YTB International (OTCBB: YTBLA), known as Your Travel Biz or YTB, operates a multi-level marketing business under the holding company YourTravelBiz.com, Inc. 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 traded on the Over-the-Counter Bulletin Board under the symbol “YTBLA” and is a member of the Direct Selling Association.[1] Other YTB subsidiaries include YTB Travel Network, Inc., Zamzuu, Inc., and REZconnect Technologies, Inc (2004–2009). The company is based in Wood River, Illinois. International subsidiaries operate in the U.S., Puerto Rico, the Bahamas, Bermuda and Canada.[2]
The company has been the subject of several lawsuits and investigations in California and Illinois alleging the company to be a pyramid scheme and usage of deceptive marketing.[3]
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Participants, who pay a $199 set up fee and $50 per month to maintain an "online travel agency" website,[4] can collect commissions for recruiting new participants, utilize the website for their own travel purposes, as well as sell travel packages to others.[5] However, most participants make the majority of their money by recruiting new agents rather than through travel sales of their own.[6]
YTB have stated they are considering replacing their referring travel agent business model with one based around franchises.[7] On October 18, 2008, they introduced a new tier of affiliates in an attempt to fit better into the travel industry, saying the new training program they will be introducing for those who remain as 'referring travel agents' improves over the previous "one-day classroom event".[8]
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.[9][10][11] By years end, the company employed 23 employees with total travel sales reaching $20 million.
In late 2008, YTB laid off 17 employees, a move that was part of a reorganization.[12] Later that year it announced plans to sell an office building and its corporate Learjet.[13] In 2008 the company's revenues were $44.8 million.[14] YTB said its independent audit at the end of 2008 expressed "substantial doubt about our company's ability to continue as a going concern",[15] a sentiment the company itself later echoed.[16]
The company hit trouble spots in 2009, 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[15] and then to $18 million in the second quarter.[16] 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.[17] In 2009 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.[18]
YTB received the Pinnacle Award from Carnival Cruise Lines four years in a row.[19]
California Attorney General Jerry Brown and former employees sued the company in early August, 2008, 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.[20]
Brown sued the company for $25 million in early August 2008, charging unfair business practices, false advertising, and operating a "gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else".[21] U.S. Securities and Exchange Commission (SEC) filings showed that the company's three creators earned more than $2 million in 2007, a dozen salespeople earned more than $800,000, and dozens earned more than $100,000.[11] 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.[11] 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.[22] Brown said the agreement would put an end to the $450, $50 per month unprofitable personalized websites.[15]
Around the same time, several former agents filed a class-action lawsuit—seeking to include more than 1,000 of their peers, 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".[23] YTB responded by stating that it intends to "vigorously defend the case,"[23] and the case was dismissed in July 2009 on the grounds that non-residents of Illinois could not pursue the matter under Illinois law.[24] 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.[25] 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.[26]
In 2007, YTB was also investigated for similar allegations in Rhode Island.[27]
In the defense of YTB, several current agents have characterized the complaints from former agents as sour grapes from those who didn't spend enough time attending to their business. "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."[28]