For longtime travel professional Tom Ogg, the battle against industry card mills has turned into a nearly two-decade crusade. Since 1991, when Ogg attended a meeting with World View International, he has been fighting an uphill battle.
Ogg was brokering travel agencies at the time and was interested in the company’s business model. But soon after the meeting, he filed a complaint with the International Air Transport Association (IATA), noting World View was using International Airlines Travel Agent Network (IATAN) numbers on its knock-off cards.
Despite Ogg’s complaint, World View eventually grew to amass about $50 million in sales — with tens of thousands of “agents” under its wings — before it was sued by the American Society of Travel Agents (ASTA) for unauthorized use of the ASTA logo in 1994. The company settled, then closed and became known as one of the travel industry’s first card mills.
Even with continuing industry concerns about multilevel marketing (MLM) companies and card mills, recent controversies demonstrate that the issue is still roiling the industry.
“Today there are card mills, network marketers, affiliate networks and God knows what else is coming,” said Ogg, who founded and developed the National Association of Commissioned Travel Agents (NACTA) and, just last month, co-founded the Travel Professionals Network, a group designed to provide designations for agents with proven gross sales, education, experience and tenure. “The real challenge is to identify professional travel agents. Professional travel agents actually sell travel in a meaningful amount … [and they] are immersed in the education/experience process in the travel industry … If our industry can isolate professional travel agents … the group as a whole could be very influential.”
The latest controversy erupted seven months ago when Royal Caribbean International (RCI) ceased dealing with several firms it considered to be card mills — companies that sell agent-like IDs to anyone that pays the $500 fee.
Royal Caribbean Cruise Lines (RCCL) declined to comment for this story but noted it did not name the companies with which it was terminating business. RCCL also gave TravelAge West a copy of a letter, written last October, that notified travel partners of its decision.
The letter, signed by Lisa Bauer, now senior vice president of hotel operations for RCI, and Dondra Ritzenthaler, senior vice president of sales for Celebrity Cruises and Azamara Cruises, said the cruise line was “taking this action in an effort to prevent a growing and troubling trend within the travel industry.”
In the letter, RCCL said it was concerned that a proliferation of untrained agents could lead to negative consumer experiences, thereby undermining the integrity and reputations of professional agents, devaluing professional agents’ expertise and increasing the cost of its operations. “Our efforts in this area will be ongoing as we continue to evaluate the acceptability of the business practices of various companies and their associates,” Bauer and Ritzenthaler wrote.
YTB International Inc. of Wood River, Ill., was one of the firms that said it was a target of RCCL’s letter. It vigorously defended its business practices, saying it was a host company with industry credentials. YTB noted its membership in the Cruise Lines International Association (CLIA) and cited its three subsidiaries — YourTravelBiz.com Inc., YTB Travel Network Inc. and REZconnect Technologies Inc., which hosts a travel agency for traditional agents and offers brick-and-mortar franchise opportunities.
In a statement to TravelAge West, YTB officials said the company “is not at liberty to discuss the RCCL situation,” but that it conducts “business with the highest standards and [has] nothing to hide … The conduct of our founders and corporate leadership is impeccable, exhibiting the highest level of integrity.”
YTB officials noted that, since its inception in 2001, more than 50 percent of those who joined are still active members.
Officials described YTB as having “an annual attrition rate far below the industry [standard] and an outstanding statistic in the multilevel marketing industry … a testament to the fine program that we offer and the great training that is available to each rep and RTA [Referring Travel Agent]. “YTB is a travel agency, growing stronger every day,” they added. “It is unfortunate that our detractors and competitors feel the need to choose YTB as a target, spreading rumors, negativity, misinformation and even lies.”
But industry experts and others say this controversy is just the most recent incident of a growing problem — a gray area made muddled by a plethora of new business models for hosting agencies and conflicting interpretations of card mill definitions.
“To me, a card mill is an organization offering an ID card in exchange for free or reduced-rate travel; that is a significant difference from a professional agency that will teach you how to sell. YTB is a multilevel marketing card mill. They allude to training but don’t do much about it,” said Scott Ahlsmith, chairman of The Travel Institute. “We either need to self-regulate or we will end up being regulated by the state or some other agency.”
While the Federal Trade Commission (FTC) pursues card mills, it does so on a case-by-case basis after formal complaints have been filed. And, thanks to an FTC settlement in a 1997 case with World Class Travel Network (a MLM company with an aggressive recruitment program), the FTC has since defined the legal limits of what network marketing and MLM companies can do in order to sell travel agent identification cards legitimately.
As a result, several sellers of travel agent credentials exist today by operating within the FTC’s guidelines. While each company’s model varies, the process typically involves an up-front fee of about $500 for an ID card with an agent number designed to qualify for travel benefits, a Web site or other way to book travel and some form of instruction.
Experts say there are a handful of card mills currently operating, along with others in a gray area. But while they may be frustrating to professional travel agents, they are not illegal if they follow FTC guidelines.
“Their business model is basically ‘We can make a ton of money selling travel agent ID cards to consumers,’” said Ogg. “Of course, the more they can look and feel like a host agency, the more credibility they accrue for consumers that think they are becoming travel agents and will experience the fabulous discounts and free travel that travel agents supposedly enjoy.”
YTB aggressively defends its model, noting it sold more than $414 million in travel last year, an 84 percent increase from the previous year.
“The sale of travel and travel Web sites is our business,” Marcia Dempsey, YTB public relations director, told TravelAge West in a statement. “[Our] $414 million in travel booked says we are very interested in travel and not just engrossed in selling the business opportunity. YTB continues to execute its business strategy by growing its network of RTAs and increasing our online travel sales.”
YTB said it expanded into Canada, the Bahamas and Bermuda earlier this year and offers a national convention each year where participants can choose among 90 classes on everything from legal compliance and group travel to leadership and booking engines.
“As our company grows, so does the attention we have gained within the travel industry,” Scott Tomer, CEO of YTB, said in a release. “Over the past year, we have received praise for our energy and industry-changing business strategy from leading travel companies and organizations.
“However, not surprisingly, we have also attracted criticism from those companies with whom we indirectly and directly compete. We challenged these critics by concentrating on our business and making YTB one of the most successful travel service companies around. Moving into 2008, we see no signs of slowing down …”
Still, ASTA has applauded RCCL’s end to dealing with YTB and others — along with tighter restrictions also adopted by Marriott International.
“[This] announcement is good news to legitimate travel sellers whose businesses depend upon consumer trust and to consumers who look to their travel agent for expert and professional service,” said ASTA officials.
ASTA also developed and distributed a white paper on the subject of card mills at its consumer Web site, TravelSense.org.
A TravelAge West review of YTB’s most recent Securities and Exchange Commission filing found that, for the first three months of 2008, YTB made 79.5 percent of its revenue by selling online travel stores and collecting monthly fees. About 12.5 percent of its profits came from travel commissions and services, while 7 percent came from selling training programs and marketing materials.
YTB said it sold approximately 31,000 online travel store sites during this period for $449.95 each. Marketing commissions from its sites totaled $25 million, up 67 percent from the same year-ago period.
At the end of the quarter, YTB reported it had 138,814 registered agents, up from 83,932 registered agents in the same quarter a year earlier. It also said it paid approximately $3.9 million in travel commissions, up about 140 percent. This figure translates into an average commission of $28 per agent.
The IATAN recently rescinded YTB’s membership — along with three others — and YTB President J. Kim Sorenson has said his company is working with IATA and IATAN on the issue.
Overall, many say the conflict represents rapidly developing changes in travel distribution with the growing number of independent agents giving rise to more host agencies.
“The travel host agency has increased significantly in the past three years, bringing with it an array of business models that has confused what the host agency is about,” RCCL said in a statement announcing its partnership with the Professional Association of Travel Hosts.
But others say it also exposes the need for more self-regulation, a single accreditation process and industry-wide standards that set qualified travel professionals apart.
Experts note there is already a variety of agent identification cards. While applauding the move to identify agents, they note it also creates an increasingly confusing market.
Also, some say that, unless travel professionals isolate themselves from the rest, it is likely the industry will continue to migrate toward all viable distribution models — card mills included — out of financial frustration.
Industry insiders point out that if agent training and standards are not rigorous enough, this stands to damage the industry’s credibility. “Unfortunately, the hundreds of thousands of MLM companies, network marketers and affiliates out there represent a huge chunk of revenue to everyone in the industry,” said Ogg. “I personally have had major trade associations and educational organizations tell me that one of the worst card mills in existence today was acceptable because ‘business models change.’”
The Travel Institute’s Ahlsmith noted that, while some group travel organizers bring in significant revenue for suppliers, they are not the same as professional agents.
“Those are all legitimate, but call them what they are. Not travel professionals,” he said. “They don’t have to walk away from that revenue, but have a Group Organizer category and a Travel Professional category for those who have passed certain higher qualifications.”
Ahlsmith said the Travel Institute’s number-one goal this year is to push for a standardized travel professional exam to confirm qualifications every two or three years.
He also noted a recent forum at which researchers said this year is the first ever that online travel sales are expected to be flat or declining, with 23 percent of people saying they are dissatisfied with booking travel online.
“Consumers have gotten pretty savvy,” Ahlsmith said. “We as an industry have to regulate ourselves. How do we determine professional competency in selling travel? If we don’t, it will be done for us.
“As the economy slows,” he said, “more people are looking at other ways to make money — and card mills are very good at sales. I guarantee you we will see more.”
Standing Out
Travel Professionals Network (TPN) is an agent initiative designed to counter the array of card mills, network marketers and affiliate organizations presenting themselves as professional travel agents to consumers. TPN, founded by Tom Ogg and others, will process travel agent applications and award professional designations to those who qualify.
Recognizing that there are many ways for agents to gain knowledge and earn credentials, TPN will weigh training and certification earned through The Travel Institute, CLIA and ARC.
It also will provide credit to applicants for industry experience including supplier designations (specialist programs); industry conventions and trade shows; personal travel experiences; ship/hotel inspections; industry seminars (cruise, fams); travel industry tenure; travel school; associate, bachelor and master’s degrees in travel and tourism; travel industry association membership; advisory board service; instructor/seminar leader; author, online community leader; and other industry experience.
Applicants must pass a test; provide proof of gross sales at $50,000 per year, $150,000 per year or $300,000 per year levels; and provide documentation verifying the certifications and experience they claim in order to satisfy the minimum requirement at each designation level.
Applicants also sign an agreement and Code of Ethics and pay a one-time processing fee.
www.travelprofessionalsnetwork.com
Battling Card Mills
The best defense is knowledge. A well thought out and knowledgeable response to a question asked by one of your clients who has been approached by a card mill is much more effective than an angry retort. Card mills succeed because consumers want to believe that they can travel for free.
Don’t support organizations that support card mills. Host agents and sellers of travel agent credentials have two separate and different business models. Find out what your association’s rules are and support those that are supporting your agenda.
Visit www.ftc.gov and do your homework on card mills. A rational approach to dealing with card mills is to become savvy on the subject. Confirm organizations are operating within the confines defined in the FTC’s settlement with World Class Travel Network in 1997 and report those that do not meet FTC guidelines.
www.ftc.gov
