Travelocity.com Debacle in Clintwood Virginia
by Lewis Loflin
Update 2015: Nothing has come of this effort - Senator Wampler has retired and Congressman Boucher was defeated for re-election in 2010 failing to fulfill his promises. This stands as a historical record of what government should not be doing.
Congressman Rick Boucher likes to pretend he is the king of Telecom in Southwest, Virginia. He has touted he deserves full credit for bringing Travelocity.com to the depressed coal town of Clintwood, Virginia which is among the poorest in the state. After spending $10 million in mostly infrastructure, the press is asking why he never saw the closure of Travelocity in Clintwood coming. Further, press reports are showing the Bristol Virginia Utilities entrance into Telecom is in trouble. He was a big supporter of this venture as well using taxpayer dollars. Should Mr. Boucher receive full credit? Yes, he should.
What this proves is just how unreliable call centers can be. Congressman Boucher likes to tout these are "technology jobs" when no economic planner I know considers them any such thing. Let's note a study for telecom prepared by Design Nine, Inc. for the Lenowisco Planning District Commission prepared in 2005. Note in particular what they say about call center jobs:
The region is doing slightly better than state and national averages for high school graduates. However, the area lags both college categories, with a notable lack of college graduates (including advanced degrees), which is probably related to the lack of appropriate jobs in the region.
The lower figure for "Some college" (includes no degree and two year degree) is a potential danger signal. As manufacturing jobs are moving offshore, the new jobs being created generally require some college education and a higher degree of technical skill than the jobs being replaced. The region has been replacing traditional manufacturing jobs with call center jobs, which provide limited advancement and work opportunities...the region must be careful not to rely too heavily on them, as the work is easily moved to other regions and/or other countries...
Median income for the region is almost half the national average, and not much better when compared to the state level. This reflects a regional dependence on entry level extraction industry jobs and entry level Knowledge Economy jobs (e.g. call centers). The region must develop long term strategies to attract, support, and retain more Knowledge Economy businesses that employ higher skills workers...
According to Dickenson County officials in the Coalfield Progress on May 22, 2002, "Dickenson County has a high rate of illiteracy.... Fifty percent of the county's adult residents don't have a high school diploma, and less than 10 percent of county residents are college educated..." While the construction of industrial parks goes on, Dickenson County schools need as much as $30 million in repairs as of 2002. In many cases, their efforts to lure and keep private sector jobs at decent wages is impacted by market forces beyond their control. When the free-market systems fails, bring in the government jobs.
The facts are as follows for Travelocity according to public officials:
VCEDA funds were invested in the facility itself, which was later reoccupied by another firm (SI International). If they "fly the coup" the way Travelocity did, the improved space is still there and ready for the next tenant. Consequently, the "risk" is minimal.
In Travelocity's case, there was a top level management change that doomed the center in Clintwood (obviously beyond VCEDA control). The new management said they might consider staying in Clintwood if taxpayers handed them $10 million. The answer was no.
Firms like Travelocity, etc. (call centers) are NEVER recruited, in the sense there is an active process to find these "opportunities." If they show up, however, everyone tries to be accommodating, but also reasonable, since it's well known what the drawbacks are. To the contrary, marketing is directed to attract higher wage firms in manufacturing and (more recently) true "technology" jobs. Those kinds of jobs include software engineering, IT system design and operations, data recovery operations, etc. In those cases, qualified employees would make in the range of $50,000 to $80,000 a year.
In the view of this writer neither VCEDA nor the workers in Clintwood were at fault. They did the best anyone could hope to do.
In November 2000 Nexus Communications fired its 188 employees at the $6.7 million Dickenson County Technology Park. When they opened, local officials claimed the "creation" of 550 "new jobs." That figure was grossly inflated and when I questioned authorities on this, I got the following from Ron Flanary, who heads LENOWISCO, and is also on the board of VCEDA in April 2005:
Thank you for your inquiry regarding job creation by the Virginia Coalfields Economic Development Authority (VCEDA)...I have included the job creation and expansion numbers announced by VCEDA since its creation in 1988. Not all of these projects are still located in the region, but this will give you an idea of what has located here and the projected employment associated with the projects.
We do not track job descriptions and pay scales, but VCEDA statute dictates that we can only assist companies that meet certain criteria for job creation, with one of those criteria being that the company must pay at least 1 � times the current minimum wage.
That comes to $7-$8 an hour. In fairness to VCEDA and LENOWISCO, they do claim projections, Congressman Boucher plays this up as "created." In July 2001 they announced Travelocity had taken over the empty Nexus building. They claimed to have 70 employees, mainly people fired by Nexus. Public officials predicted the number of employees to reach 500 within a year, and to this day still claim the creation of 500 new jobs. Of coarse since by their own admission they don't track any of this, how can they make the claim? The press said the jobs only paid $8 an hour, much better than Nexus at about $6 an hour. Ref. Kingsport Times-News July 14, 2001.
December 27, 2001: The Dickenson County Industrial Development Authority has been approved for a loan of up to $250,000 to help Travelocity.com expand its Clintwood call center The Virginia Coalfield Economic Development Authority approved the loan Dec. 20, and the money will be used to pay for construction and improvements to the second floor of the Travelocity building in the Dickenson County Technology Park. About 220 employees now work at Travelocity.com's Clintwood customer service center. By June, less than a year after the Clintwood center began taking calls, Travelocity officials hope to have nearly doubled that number. They got no cash. Ref. Coalfield.com and Dickenson Star.
Update March 3, 2003. VCEDA "loans" the Dickenson County IDA $250,000 for "education" of Travelocity workers. It was supposed to be paid back through a ten year least agreement between Dickenson County and Travelocity. Ref. Kingsport Times-News
Update March 31, 2003. Dickenson County officials are hoping a new child-care center will help lure industry. The $1.6-million daycare center should be ready by early 2004. The cost is now up to about $8.8 million for Travelocity. To quote a local press report, "The facility is being built in the Dickenson County Technology Park adjacent to the Travelocity Call Center. Company officials said the promise of child care was one incentive that lured the business to Clintwood. The company plans to subsidize 54 of the 107 slots for children of its 250 local employees. The other slots are for others in the community." At about $8 an hour, this isn't enough to live on so taxpayers have to pay for daycare too.
While county supervisors tell me we can't get decent jobs because of low levels of education, schools are starved for funding while tax dollars (almost $8.8 million) go to subsidize low-wage employers with so-called "technology jobs." At a cost of almost $8.5 million to the taxpayers to help Travelocity, at 400 workers this comes to $22,000 each. For that price, we could have paid tuition/books (about $3000 per year at 20 hours per semester) for over 7 years of community college or for 1200 people to get an associates degree. They would then have real marketable skills attractive to many other fine companies that would locate here. Guess it's better to keep people in their place than change anything.
Update May 2005: Travelocity.com decides to dump Clintwood, Virginia for India. Congressman Rick Boucher (D VA 9th) calls this a success story and that he deserves full credit. Companies like Sykes and Travelocity are dumping rural America in droves, while the local press asked why Congressman Boucher never saw it coming. Those promised 500 "new jobs" turned out to be 250 including temps and part-time workers with no benefits. Total cost, in excess of $34,000 per job.
Update June 4, 2005. To quote a local press report, "The Virginia Coalfield Economic Development Authority wants to keep the jobs it lures to Southwest Virginia, which has endured losses in recent years to cheaper overseas labor...the authority has changed its recruitment and development strategies for the upcoming fiscal year...State and federal contracts are among the new targets...The region had success luring an AT & T Virginia Relay Center to Norton and a Virginia Employment Commission customer care center to Grundy. Both rely on government contracts to keep them in business. "Federal contracts can be lucrative and provide stable, long-term employment opportunities...Usually, the compensation is excellent and the benefit package is excellent. The benefits and compensation frequently mirrors federal and state pay and benefits." Ref. Bristol Herald Courier.
Update June 22, 2005. To quote, "An $18 million federal contract will mean more than 80 new jobs in Dickenson County. SI International, a company based in Reston, VA., will open a call center in the former Travelocity building...SI International has already contacted some former Travelocity workers about the possibility of hiring them. The company offers hourly wages in the $9 to $10 range...The authority decided last month to change its recruitment efforts to focus more on landing companies that contract to provide services for federal and state governments...Because it won a federal contract, the company will not require any financial incentives from the authority..." Ref. Bristol Herald Courier
Update for February 26th. The following information has turned up.
Very interesting site! I actually work in the Clintwood location for Travelocity. All, I see constantly in the local newspapers is positive things about Travelocity. I must say that we have been lied to from the time the company has opened the doors. I work in the sales dept and our incentive checks have steadily decreased because of cutbacks by Mgmt. When you go from averaging 1000 dollars on an incentive check to 200, something is wrong.
There are several issues that the media needs to look into at Travelocity. Recently also it was said that the IDA has approved 2 million dollars to be used as an incentive for Travelocity to stay for 2 more years. I'm just wondering why we would want a company to stay when we know they're going to leave in 2 years? I think the 2 million dollars could be used to fund some college work for the employees. I just hope Travelocity rejects the idiotic offer of 2 million and moves on. The tax breaks and incentives for companies to move into this area are getting a little old. If anyone has any information about the offers for Travelocity to stay please email me.
Coeburn, VA USA - Thursday, February 26, 2004 at 18:57:22 (PST)
Feb 20, 2004 Bristol Herald Courier
The editorial, "Travelocity: A warning for the region," asked why nobody saw this coming. I did and have had it on my Internet site for three years and made numerous mentions about Travelocity and risky socialized cable and telecom in this very column. I got attacked for not being "my brother's keeper."
As one with close relatives in Clintwood, including two young nephews, I want them to have a future doing more then selling apples in front of the Ralph Stanley "pork-barrel" museum that cost taxpayers over $1 million. We pretend it's economic development.
Last year, we wasted $1.6 million for socialized day care for Travelocity to help their low-wage workers. Travelocity never produced the jobs promised and the total cost of this debacle could run over $40,000 per job. ($10 million?)
This concept of massive corporate welfare and cheap labor as business incentives encourages companies to fire present workers and exploit communities reduced to beggary and desperation by destructive trade, labor and immigration policies in Washington. AT&T in Lebanon and Verizon in Wise are both listed as exporting jobs to Asia. These companies have no loyalty to communities or their workers.
Sykes is known as a global leader in Asian out-sourcing of jobs. According to the St. Petersburg Times, (June 26) Sykes is shutting down all call centers across rural America. They dumped 393 workers in Hazard, KY., in August, costing those taxpayers millions in losses. They are dumping 324 jobs in Pikeville April 10. Wise could be next costing millions more in that near-empty industrial park.
We should freeze all economic development in this region and demand full public disclosure. We must also oppose Senator William Wampler's Bristol Virginia Utilities Secrecy Bills (SB 280, 282) that will help cover-up millions in losses and out-of-state contracting of work and hide cost shifting to electric customers. Just throwing money at problems solves nothing. End socialized telecom.
2004 Media General, Inc.
Update for December 2004. SB 280,282 failed to pass and have been dropped according to Senator Wampler.
Feb 18, 2004
I have worked at Travelocity and my husband still does. About a month ago, we were watching a news program about classes in India. They were training people to speak English and sound American, even using some of our slang words, so that it was difficult for callers to distinguish that they were from another country. They were in these classes so they could be hired by one of the many U.S. companies that have moved their call centers over to India.
There has been a recent wave of big companies that shut down their call centers stateside and moved them overseas because the cost of employment is so much cheaper there. We were both shocked at this, but felt confident Travelocity would never do this. We had just went through extensive training for new programs Travelocity was implementing. And, the company said it had just spent roughly $80 million on an ad campaign.
We all felt pretty safe in our place at Travelocity until this past Wednesday when they told everyone the Clintwood call center was to be shut down in December. Travelocity customer service was going to be moving to India. It seems after spending $80 million on the "roaming gnome," they could no longer afford us and had to resort to a call center version of a sweat shop.
The immediate impact of this decision is as follows: Approximately 300 agents will lose their jobs and the Clintwood center is completely shutting down. This is going to have a big impact on the Clintwood area. It is a small town and there are very few jobs to be found. The economy here is going to take a big hit. The state just funded a day care that is being built on land adjoining Travelocity. It was built primarily for Travelocity employees. Travelocity has received tax breaks and other such incentives.
With the economy so low, U.S. companies need to do everything in their power to help in whatever ways they can. Travelocity has not done this. It has given jobs to outside countries and left 300 people jobless - 250 of those in a small town with very few jobs and the economy already bad. Just these 250 people will have such a major impact on this area it's hard to say what will happen.
The employees of Travelocity are very angry with its decision to make this move for the obvious reasons, but also because of the American economy and because we feel this will be bad for the customers who continue to use Travelocity. Travelocity has turned its back on American citizens and their customers, all for the almighty dollar.
In the end taxpayers shelled out over $10 million in various forms of corporate welfare to move call centers one after the other into Clintwood, Virginia. The number of jobs never exceeded 250 at any time while they will claim to this day they "created" over 1100 new jobs. In the end they moved in a government contractor called S.I. International (they have changed hands since) and claim 130 jobs today. The typical call center job in this region pays $8-$9 dollars an hour. The Pikeville call center never reopened and was shut down for similar reasons.
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