YTB International’s recent agreement with Sixth Scott LLC, identified as a “non-affiliated third party” to sell its travel assets could net the company $7.5 million in commission payments, not including potential annual bonus payments.
According to documents filed with the Securities and Exchange Commission (SEC), YTB described the transaction as an “asset purchase” and identified a new entity, First Travel Alliance LLC (FTA), as a wholly owned subsidiary of Sixth Scott.
YTB described its travel operations as being in the “business of creating, selling and supporting online travel booking websites to subscribers through websites and otherwise selling travel through various means.”
It did not identify the number of “subscribers” – primarily independent agent travel sellers – who could be impacted by the move or changes in agent/seller compensation or costs.
The SEC filing says that YTB – the seller - agreed to sell, assign, transfer and convey to Sixth Scott the contracts, agreements and licenses held by YTB and that Sixth Business agreed to assume the YTB travel unit debts, obligations and liabilities.
YTB said it had agreed to engage Sixth Scott as the sole and exclusive provider to YTB (that includes the YTB Travel unit) all travel related services anywhere in the world other than Canada during the term of the agreement.
The agreement has a term of five years and will automatically renew for one-year periods unless otherwise terminated.
“Total potential compensation paid to YTB Travel including installment payments and assuming maximum Net Commission Payments, not including potential annual bonus payments, totals $7.5 million, “ the filing said. YTB is a publically held company with shares traded under the symbol YTBLA.PK
In addition, Sixth Scott may offer employment to certain YTB Travel employees, as provided in the agreement, and the YTB will use all commercially reasonable efforts to encourage those employees to accept employment with the purchaser.
The closing date for the deal is January 31, 2012 with YTB Travel paid in installments starting with $400,000. An additional installment of $200,000 is due after a minimum of 1,000 so-called YTB subscribers have converted from an Orbitz-based travel booking system to Sixth Scott’s travel agency booking system. Another installment will be paid of $150,000 after 1,500 subscribers have converted to the Sixth Scott booking system.
In a complex formula, Sixth Scott shall also pay YTB Travel on a quarterly basis an “amount equal to the product of the applicable commission rate “ in a declining scale starting at 75 percent. There is another formula for annual bonus payments. YTB also benefits from provisions that appear to protect it from loss of subscribers or failure to meet installment targets.
YTB has yet to offer details of who owns Sixth Scott LLC or FTA or its management and ownership. Nor has it identified the booking system to be offered or the specifics of its program for subscribers/agents.
The influential blog “MLMs and Travel: A Bad Mix” by John Frenaye (http://notravelmlms.blogspot.com/) who covers YTB in depth quotes YTB advocate Doug Bauknight in his online newsletter to YTB subscribers (http://www.justpictureitnow.com/) as a winning deal.
“Everything you love about YTB is staying exactly where it is! You'll have all the commission percentage opportunities, group booking access, and a fabulous customer facing booking engine (which will be getting a new look!),” Bauknight said. “You'll have access to even more travel vendors including all the major cruise lines, tour operators, hotels, airlines and charter organizations, best in class package deals, and even vacation home rentals! And, you'll book these vendors through your industry-leading agent only booking system! (No more commission claim form to fill out or various usernames and passwords for vendor specific booking engines!).”
“There will be new, specialized, in-depth training," Bauknight continued. "This training will show you exactly how to be successful - even if you have limited experience in the travel industry. This new training program allows you to become even more knowledgeable in cruising, hotel properties, tour companies, and even destination specialists from some of the vendors who aren't currently available to you. The new partners are IATAN accredited, and those who meet certain commission requirements may be eligible to receive an IATAN ID card. With this, access to FAM trips, inaugural cruises, and ship positioning cruises where available are all a possibility."
“Industry perks will also be back in full force with IATAN accreditation just like before. (As always, reserved for those who actually earn it.) Access to FAM trips, inaugural cruises, and ship positioning cruises where available are all a possibility. A new A-list program will also be introduced in the near future for those Travel Agents who produce the travel required,” Bauknight said.