Analyzing the JoyStar Controversy

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Does the travel industry have a responsibility to monitor the financial stability of host agencies such as TravelStar/JoyStar, the controversial Aliso Viejo, CA, agency? Peter Stilphen, president of Coral Sands Travel, for one, believes it must. Not only because hundreds of independent agents, employees and suppliers may be involved in a collapse, but also because the industry has a responsibility to police itself.

In an interview with Travel Agent, Stilphen urged the Professional Association of Travel Hosts (PATH) to get more involved and urged that all segments of the industry wok together to “tighten up the rules and improve standards.”

“PATH, which represents many of the mainstream host agencies, should be the leader in improving standards. To date, they have been too quiet,” Stilphen said, noting that he was a founding member and past president of PATH (At press time, PATH was expected to issue a statement clarifying its position on TravelStar, which is not a PATH member).

"JoyStar may be gone," Stilphen noted, citing TravelStar/JoyStar’s losses, but the “larger multilevel marketing firms are still there and pose even a greater problem for the travel industry down the road.” Stilphen is so convinced of TravelStar/JoyStar’s early demise that he is exploring a class-action lawsuit against TravelStar/JoyStar.

“We are creating a list of JoyStar affiliated agents who have not been paid commissions for an attorney considering a class-action lawsuit against TravelStar, JoyStar, Bill Alverson (TravelStar’s president), et al,” said Stilphen. Any agent who may wish further information or would like to be a part of this lawsuit should e-mail Peter Stilphen at liberty3675@embarqmail.com with their name, contact info and amount claimed.

“Your name will be turned over to the attorney handling the case and his office will be in touch with you. Your information will remain confidential and will be used for the purpose of determining whether a lawsuit is the proper way to go,” Stilphen, a consistent critic of TravelStar/JoyStar’s business model, said.

“We have a situation where many JoyStar travel agents will not be paid their commissions,” he alleged. “Many of these agents are still unaware of the JoyStar disaster and should be notified in order that they may address their particular situation with the company. In addition, a total collapse of the host agency JoyStar will have effects on other host agencies and should also be addressed by them.”

Stilphen continued: “Many travel agents may lose their hard-earned commissions. It could have been a lot worse if some of us said nothing. At least some of the agents believed what I have been saying for four years and took steps to limit the damage.” TravelStar/JoyStar has claimed as many as 1,500 agents.

“It was never about being a competitor because my company was also a host agency,” Stilphen said. “We were a totally different animal than the multifaceted TravelStar (JoyStar). It was always about a flawed JoyStar business model that was doomed from the beginning.” Stilphen also recently formed STARS, a trade group to encourage professionalism.

“I'm sure we have not heard the final chapter from JoyStar and the misadventures of its CEO. It is now up to my fellow host agencies to come forward with a plan to help these JoyStar agents who are out commissions. I have done so on my own website at www.coralsandstravel.com,” he said. Alverson recently admitted to Travel Agent that TravelStar/JoyStar has had problems, but denied that it was the end of the company.

On September 24, Alverson released double-digit percentage increases in sales from eight suppliers. "Sales for 2008 have been substantially higher than we had earlier expected,” he said. “Beginning in the fourth quarter of last year, in anticipation of a slowdown, we implemented a major initiative to reduce fixed costs to weather the storm. We also curtailed our advertising spending, making the growth we are seeing even more impressive.” (The last released posited at www.travelstar.com is dated April 25, 2008.)

“While vacation sales are up and confidence remains high, we too have felt the effects of a volatile stock market. The company's share price fell off sharply recently and it was confirmed yesterday that a distressed hedge fund was forced to liquidate its holdings, including its entire position of TravelStar, because it could not meet a margin call,” Alverson said.

"This is an example of the far-reaching implications of the market we are in right now. It affects all of us in many ways and you must have the fortitude and ability to navigate turbulent waters and look for the new opportunities being created. Our business model was designed for bad economic times. A slowdown in the travel industry in general forces agency owners to look for every possible way to gain efficiencies. Partnering with a host travel agency is becoming increasingly popular and continues to be the major driver of Travelstar's organic growth," Alverson said, confirming in a subsequent interview that TravelStar’s problems were temporary.

Stilphen’s take is different, especially in view of a lawsuit filed by Six Continents Hotels Inc. against JoyStar in federal court for the Northern District in Atlanta on October 15 for fraud. “The ‘fat lady’ is now singing, “ Stilphen said. “It's all over but the formal announcement…At this point, divine intervention nor actually renewing the Florida Seller of Travel license and being reinstated by CLIA (which recently terminated its JoyStar/TravelStar membership) would make much difference. Most of their producing travel agents have already moved over to new host agencies. Coral Sands Travel signed up over 15 good producing agents while TPI and GTM certainly signed up a bunch along with others.

“Who do we blame for all this? I blame some of the media, a couple of the travel agent organizations and a few overly protective suppliers, all with the same reasons for supporting this obvious ‘con’ for the last four years. It was all about revenue dollars without applying ethics. I call it greed," Stilphen said.

Is Stilphen correct? Who should be responsible for watch-dogging TravelStar/JoyStar? Or YTB International? Is it the responsibility of an individual agent such as Stilphen, who has arguably taken a gutsy stand at some personal risk? Or should trade associations, the media or consortia bear some responsibility? And what about the Securities and Exchange Commission (SEC), which monitors publicly held companies such as TravelStar? Certainly TravelStar/JoyStar’s management has a responsibility to communicate accurately and responsibly.

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