Turbulence in Travel Industry

Angellia Walters never wanted to work as a travel agent. She just wanted to travel like one.

So last year she and her husband agreed to pay $2,995 to become “outside” travel agents for a Laguna Hills firm called Travel Partners. The company guaranteed the couple access to rock-bottom agent rates on everything from theme parks to air fares and hotels--and they didn’t have to sell a nickel’s worth of travel to qualify.

By simply flashing their Travel Partners ID cards at airport counters and ticket windows, they were told, the Buena Park couple could reap big savings on their own trips, including cruises to exotic ports of call.

“That was the hook,” said Walters, who paid $748.75 down and financed the balance through Travel Partners at 18% interest. “They said we could get travel agent rates on cruises, and we wanted to do more of that.”

Like thousands of consumers across the country, the Walterses joined an independent travel agent network, one of a number of fast-growing firms sprouting in California and nationwide.

For fees ranging from hundreds to thousands of dollars, promoters promise to train consumers to become part of a network of independent, at-home travel agents who can make commissions and enjoy discounted travel benefits just like the professionals.

But not long into their stint as “travel agents,” the Walterses and dozens of other Travel Partners associates discovered that the business isn’t always smooth sailing.

Members trying to book trips through Travel Partners say they encountered delays, excuses, even disinterest from the firm. The company’s travel agent training turned out to be rudimentary “rinky-dink stuff,” according to one member. And when it came to getting big discounts, some members say their credentials weren’t worth the plastic they were printed on.

“My daughter called the airlines and got cheaper rates than I got through Travel Partners--and she’s 17 years old,” Walters said.

Travel Partners has since filed for Chapter 7 liquidation. Some members have sued the company in small claims court in an attempt to get their money back. Others have complained to law enforcement agencies such as the Orange County district attorney’s office, which has informed them that it is now investigating the firm’s owner, Larry Robinson of Mission Viejo.

Robinson acknowledges that Travel Partners experienced some operational difficulties, but he insists many members got the discounts and rewards they were promised.

Meanwhile, Walters regrets trying to play travel agent in an attempt to get cut-rate cruises.

“I wanted something for nothing, but there’s no such thing,” Walters said. “Unfortunately, it cost me plenty to find that out.”

Travel Partners is part of a do-it-yourself movement that is sweeping the travel industry and changing the way tickets, cruises and hotel rooms are sold.

In print ads and through telephone and mail solicitations, scores of new companies are offering consumers the chance to earn extra money and industry perks by becoming independent travel sales representatives, known in the industry as “outside travel agents.”

The best of these companies offer consumers the chance to learn the ropes, earn sales commissions and start a bona fide home-based travel business. Although many of these “agents” don’t operate the computerized reservation system, cut tickets or handle any of the technical chores normally performed by full-service travel agents, they can generate thousands of dollars in sales for their companies by booking trips for their friends, families and neighbors.

The worst companies, derided in the industry as “card mills,” sell little more than laminated travel agent ID cards along with exaggerated claims about the super deals that consumers can get with them. Still others function mainly as multilevel marketing gimmicks, paying their “agents” a percentage of the earnings of new members the “agents” recruit.

The problem for regulators and consumers is knowing which is which.

“They are sprouting like mushrooms in California and the rest of the country,” said Jerry Smilowitz, state deputy attorney general in Los Angeles. “We’re still trying to get a handle on them.”

Traditional travel agents, many of whom attended costly travel schools and worked hard to gain professional accreditation, resent the invasion of their turf by legions of inexperienced newcomers.

“They are destroying the professionalism of this industry,” said Bev Zukow, owner of a Villa Park travel agency who has lost a few clients to the networks.

Network promoters counter that traditional agents simply don’t want the competition. They say networks are doing for travel sales what companies like Avon and Amway did for retailing--moving more merchandise by utilizing armies of at-home salespeople.

But the real flap is in the area of travel agent discounts. Airlines, hotels, cruise ships and other travel suppliers have traditionally offered travel agents cut-rate deals--as much as 50% to 80% off retail--as a courtesy to get them to check out their products and sell them to clients.

A major travel trade group contends that some networks are merely in the business of selling travel agent credentials and a way for consumers to pose as travel agents to get discount travel rates. The American Society of Travel Agents, the nation’s largest travel trade association, has petitioned federal regulators to crack down on the so-called card mills that it says are ripping off consumers and suppliers alike.

But experts say much of what travel agent networks do appears perfectly legal. Travel suppliers can extend or withhold discounts to or from whomever they please--travel agent or no travel agent. And consumers cum agents can’t be prosecuted for simply trying to get a good deal on a flight or hotel room.

But many industry veterans are dismayed by the rapid rise of a business that appears to encourage people to masquerade as something they’re not in the pursuit of a cheap vacation.

“Card mills may be legal, but they aren’t legitimate,” said Ed Perkins, editor of Consumer Reports Travel Letter. “Only people who make their living selling travel should call themselves travel agents.”

Upheaval in Industry

The rise of independent agent networks underscores a broad upheaval in the industry, and changes in the way travel traditionally has been sold.

No one knows the exact number, but it’s estimated that at least 70 firms across the country are now offering people the chance to become independent travel agents. Outside agents aren’t new to the industry. Established agencies have hired them for years. What’s different is that consumers can affiliate with many of these new firms almost instantly by simply paying a membership or materials fee. Thus, these companies are known in the industry as “instant travel agencies.”

Two of the largest are based in Southern California--Irvine-based Nu-Concepts in Travel, which boasts more than 25,000 members, and InteleTravel International in La Jolla, which says it has 42,000 members. Both are less than 2 years old.

The largest of such organizations essentially are huge travel agencies that divide the duties of traditional full-service agents into separate functions. Legions of salespeople--the outside agents--earn commissions by steering business to the organizations, while the networks’ inside staff handles all the computer work, ticket processing and administrative chores. Because outside agents perform no technical duties, their commissions typically are much lower than those earned by full-service agents, as little as 20% of the total commission on some products.

Although the fees to join the networks vary, many firms charge $495, just below the $500 threshold that would require them to register their programs as “business opportunities” with regulators in most states, including California.

Proponents tout the networks as a great way for people to earn extra income or start a second career without the expense of travel school or a storefront.

Andrea Butler, spokeswoman for InteleTravel, said networks like hers are much more efficient than mom-and-pop travel agencies. Their great size gives them clout with suppliers, she said, while their structure allows them to mobilize armies of salespeople who push the product and leave the paperwork to others.

“Our agents are out selling instead of sitting in front of the computer,” Butler said. She added that her company posted $100 million in travel sales last year. “We want to become the largest seller of leisure travel in the country.”

But critics charge that consumers are attracted to some networks by inflated promises about cheap travel, not the opportunity to run their own businesses.

“Real agents bust their butts to get those benefits,” said Susan Tanzman Kaplan, vice president/secretary of the American Society of Travel Agents and owner of a Los Angeles travel agency. “Now you’ve got people paying a few hundred bucks for a card who think they are entitled to the same thing.”

Kaplan’s group has gone on the offensive to protect America’s 250,000 professional travel agents.

Beginning in December, the group has filed complaints with the Federal Trade Commission and the National Assn. of Attorneys General, imploring them to crack down on the so-called card mills.

“There’s no question this phenomenon is growing,” said Paul Ruden, senior vice president of the travel agent society. “The number of card mills is increasing . . . and they are becoming more aggressive in their techniques.”

Litigation and investigations are on the rise:

* The society sued La Jolla-based World View International in 1994 for unauthorized use of the society’s logo on its travel agent ID cards. The company turned over several thousand of the cards to the society as part of an out-of-court settlement and closed its doors last year. InteleTravel bought World View’s assets in March 1995 and operates out of the same offices, though it says it is not connected to the defunct company.

* In May, the society filed a similar lawsuit against Nu-Concepts, alleging that the Irvine firm illegally used the society’s logo to promote its program and agent credentials.

Nu-Concepts spokesman Ron Cummings denies the allegations and says the travel agent group’s real motive is to thwart the expansion of his fast-growing firm.

“Our company is challenging and changing the way that travel is distributed,” Cummings said. “That’s what this is really about.”

* Hawaii is investigating another Orange County company, Irvine-based World Class Network, to determine if the multilevel marketing of its travel agent training materials constitutes an illegal pyramid operation in that state. World Class officials contend that it is a legitimate business.

Many vendors have stiffened their requirements for granting agent discounts in response to a glut of spurious credentials. Rich Steck, spokesman for Royal Caribbean Cruise Lines, says his company weeds out agent “wannabes” by verifying the productivity of people who apply for reduced-rate agent berths. “We don’t have enough space to give every legitimate travel agent reduced-rate space, much less nonproducers,” Steck said.

Still, instant travel agencies continue to multiply. As many as 25 new ones were formed last year alone.

Enticed by Promises

Looking back, Duane Hammar says he should have known better. His car alarm began screeching when he pulled into the parking lot to attend a Travel Partners sales presentation last year.

“It should have woke me up,” the Riverside retiree said with a chuckle. “I should have stayed outside.”

Hammar and others say solicitors enticed them to the meeting with the promise of a free trip to San Francisco or Las Vegas. The presentation held out the promise of even more benefits through the Travel Partners program, including agent credentials the company said would entitle members to deep discounts and “royal VIP treatment” from vendors. The deal also included condominium certificates allowing members to vacation at luxury resorts worldwide for $379 a week. It all came with a money-back guarantee, and there was the promise of some commission money to boot.

“It just sounded so doggone good,” said Hammar, who paid 10% down on his $2,995 membership and financed the rest through Travel Partners at 18% interest.

But it wasn’t long before he and others suspected they may have gotten less than they bargained for.

Booking trips for clients through Travel Partners proved so cumbersome that Hammar soon gave up in frustration. Priscilla Locketz of Anaheim got so fed up with the poor service that she took Travel Partners to small claims court and eventually received about half of her $1,045 purchase price back.

When Ted Dichirico of Los Angeles tried to book himself an inexpensive agent’s trip to Russia, the supplier told him he needed International Airlines Travel Agent Network certification. That widely recognized industry ID card is available only to agents who meet stiff requirements for sales volume and hours worked.

When Travel Partners failed to deliver three free condo weeks promised by a salesman to Mary Ojeda, the Anaheim law office manager also took the company to small claims court and won--but has yet to receive her $2,200 judgment.

Meanwhile, Janet and Larry Reinhart of Huntington Beach never got their trip to San Francisco, the “free” prize that ended up costing them $2,000 for a Travel Partners membership.

“There were so many restrictions we could never go,” Janet Reinhart said. “. . . This whole thing has been a nightmare.”

And as for the money-back guarantee . . .

“That was as worthless as the rest of it,” Walters said.

‘Moral Obligation’

Travel Partners owner Robinson blames overzealous sales agents, administrative problems and greater-than-expected expenses for his company’s woes. Travel Partners’ February 1996 Chapter 7 bankruptcy filing lists $885,000 in outstanding debts, including $395 to the Better Business Bureau for unpaid membership dues.

The filing isn’t Robinson’s first. Last year he sought Chapter 7 liquidation for two time-share companies he owns, listing debts of more than $40 million.

Robinson admits that his firm encountered some difficulty, but says Travel Partners had many satisfied customers. In fact, he says he has signed about 500 of the more than 2,000 Travel Partners members with a new network in the wake of his bankruptcy filing to ensure they get the discounts and benefits they are owed.

“I have a moral obligation to make sure that Travel Partners members get some of what they were promised,” he said.

The Orange County district attorney’s office declined to discuss or even confirm an investigation of Robinson’s business practices. However, several Travel Partners members provided The Times with copies of letters they received from the prosecutors’ office regarding an inquiry.

In general, however, law enforcement experts say much of what agent networks do appears to be legal.

While critics deride some networks as illegal pyramid schemes because of their emphasis on recruitment, they have yet to prove it. There is nothing wrong with multilevel marketing or charging people fees to join a network, as long as travel sales are the main focus of the enterprise, according to Art Weiss, a Texas assistant attorney general and a national authority on travel scams.

“It’s not a pyramid if there’s a product,” Weiss said. “A lot of these outfits have found a way to skirt the outer edges of that definition and still stay within the law.”

And as for promised “agent” discounts: Although instant agents may not be eligible for the deep discounts reserved for professionals, some discounts may be available.

A number of vendors grant volume discounts to agent networks, just as they would to other large groups like auto clubs. Likewise, if companies have excess inventory that otherwise would go unsold, they may knock off a few bucks for practically anyone, including someone holding an instant travel agent card, according to industry observers.

“As long as people are getting some benefits with these cards, the claims may not be illegal,” said Susan Henrichsen, assistant attorney general in San Diego. “. . . In the end, it’s up to the vendors to decide who gets discounts.”

Experts say people interested in outside travel sales should think twice before paying to join a network, when many conventional agencies will take them on for free.

Likewise, Consumer Reports’ Perkins advises consumers hungry for travel bargains to check out ticket consolidators, auto clubs and other proven penny-pinchers.

“There is a wealth of information out there on how to travel cheaply,” Perkins said. “You don’t have to misrepresent yourself to do it.”

Walters, the former “travel agent,” wishes she had heeded that advice.

“We could have taken the money we spent on Travel Partners and taken a really nice trip,” she said. “We’ve learned our lesson.”