YTB International

Business model

YTB reports having thousands of representatives in the United States, Bermuda, the Bahamas and Canada who have sold over $2 billion in travel in the company's first 10 years. In 2012, YTB was listed as the 52nd largest travel agency in Travel Weekly's yearly "Power List".

YTB Global Travel Inc has two separate companies that operate under the YTB Global Travel Inc. corporate umbrella: YTB Travel Network and YTB Marketing. Representatives can participate in one or both programs.

In YTB Travel Network, representatives participate by purchasing an "online travel agency" website from which they can be paid a sales commission. After paying a set up fee and monthly maintenance-fee, representatives can sell travel-packages online to others, as well as utilize the website for their own travel purposes.

In YTB Marketing, representatives (referred to as "Independent Marketing Representative" or Reps) market YTB's representative programs to others. YTB does not charge a fee to participate in the marketing arm of YTB Global Travel. YTB pays a commission or referral fee and tiered compensation to those who participate in the Rep marketing program.

History

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. By years end, the company employed 23 employees with total travel sales reaching $20 million.

In 2007, Royal Caribbean stopped doing business with YTB, describing the company as a "card mill"; an industry term for a business that provides perks that are intended for a limited number of travel agents to the general public.

In 2008 the company was sued by California Attorney General Jerry Brown. An out-of-court settlement required changes to the company's business model, and generated a decrease in membership attributed to bad publicity. In late 2008, YTB laid off 17 employees, a move that was part of a reorganization. In 2008 the company's revenues were $44.8 million. YTB said its independent audit at the end of 2008 expressed "substantial doubt about our company's ability to continue as a going concern", a sentiment the company itself later echoed.

In 2009 the company was 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 and then to $18 million in the second quarter. 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. The decline in revenue led the company to sell several commercial properties it owned in 2009, including the company's Learjet. That year 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.

In 2011 the company sold its headquarters building and adjoining property for $7.6 million. In October 2011, a newly formed company, Sixth Scott LLC began purchasing YTB Travel Network from YTB International. The company was relaunched as First Alliance Travel one year later.

On February 1, 2012 founder J. Kim Sorenson died at the age of 62. In March 2012 the YTB announced a plan to merge with LTS Nutraceutical, another MLM firm. In May the company began a major restructuring, and stated that the President and CEO, Robert Van Patton, had submitted his resignation. In September YTB called off the merger, and announced that founder and chairman Scott Tomer was also resigning.

On March 1, 2013 YTB International filed for Chapter 11 protection in federal court in St. Louis. The last quarterly earnings report the company filed was for the third quarter of 2011, although the company later announced that the report contained errors.

On October 11, 2013 YTB completed the sale of its assets to a Chicago-based businessman Sam Hathi of Jamraval, Inc. "We believe the YTB franchise can be turned around and that it can regain the leadership position that it once held in the travel services industry," said Hathi in a statement. YTB has operated as YTB Global Travel since being acquired.

Lawsuits

In August 2008 California Attorney General Jerry Brown sued the company for $25 million, 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. 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. 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. Brown said the agreement would put an end to the $450, $50 per month unprofitable personalized websites.

Around the same time, several former agents filed a class-action lawsuit 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". YTB responded by stating that it intends to "vigorously defend the case," and the case was dismissed in July 2009 on the grounds that non-residents of Illinois could not pursue the matter under Illinois law. 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. 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.

In 2007, YTB was also investigated for similar allegations in Rhode Island.

In the defense of YTB, chief executive Scott Tomer said "We [are] are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court."