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O.C. Travel Company's Closure Costs S.F.

Tourism: Federal action against World Class Network forces cancellation of three-day convention.

March 06, 1997|JAMES S. GRANELLI | TIMES STAFF WRITER

IRVINE — A three-day convention that could have meant $5 million or more in revenue to San Francisco and its hotels and other business was canceled at the last minute after the government shut down an Orange County travel company.

Distributors for World Class Network in Irvine began calling San Francisco hotels early Wednesday to cancel rooms, meetings and meals after a federal judge refused to modify an order closing the business temporarily.

But the Federal Trade Commission, which sued World Class Network and its operators, accused the company of deceiving consumers into buying kits for setting up at-home travel agencies. The court order also froze the company's assets and appointed a receiver over the operations.

Former operators, through their lawyer, denied the FTC allegations.

In San Francisco, where Mayor Willie Brown's office was lobbied heavily by former World Class operators and distributors, the cancellation put a big dent in business.

"It's going to hurt us quite badly," said John Stoddard, general manager of the Parc Fifty Five Hotel, which stands to lose more than $250,000 in room charges alone. "It's kind of the soft time of year, so to lose this on such short-term notice is devastating."

In addition, he said, there are "all the intangibles," such as lost wages and lost meals.

"Phones started ringing off the hook this morning with people canceling," he said. "It was shocking."

The Parc, the city's fourth-largest hotel, was turning over nearly half its 1,009 rooms to World Class Network employees and distributors, serving as the base for conventioneers, Stoddard said. Five other hotels also had rooms reserved for the convention, he said.

Stoddard estimated that the city itself would lose more than $200,000 in room tax revenue alone.

Doug Neilson, of the San Francisco Convention and Visitors Bureau, said the company had told the bureau it would need 2,500 rooms. A former company lawyer had said previously that 8,000 people were expected.

The bureau figures that the average conventioneer spends $340 a day, though Neilson said it varies greatly from convention to convention. That average would bring in more than $5 million from 5,000 conventioneers.

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The FTC said it had little choice but to seek a court order closing World Class Network. The five-member commission "reviewed a substantial amount of evidence" before taking the drastic step, said Eileen Harrington, associate director of the FTC's consumer protection bureau.

"For commission to prevail, it has to demonstrate that misconduct was found in a significant number of instances," she said. "So it's a safe bet that this lawsuit was initiated with significant evidence to show that there's a pattern and practice of deception."

Though the shutdown is temporary, the agency will be going to court Monday to obtain a preliminary injunction, which would end the operation for all practical purposes.

"My understanding is that the court-appointed receiver has grave reservations that there is any way to operate this company without breaking the law," Harrington said.

World Class Network is part of a fast-growing do-it-yourself movement that is sweeping the travel industry and changing the way tickets, cruises and hotel rooms are sold.

Scores of new companies nationwide are now offering consumers the chance to earn extra money and receive industry perks by becoming independent, at-home travel sales representatives, often referred to in the industry as "outside" travel agents.

But many in the industry have been pressing for a crackdown on certain operations that provide little more than laminated travel agent identification cards along with exaggerated claims about discounts and perks that come with the cards.

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