Numerous people have suggested that it doesn’t really matter that you can’t buy tickets on the Universal Travel Group’s website. After all, all you need to do is give a valid Chinese mobile phone number and they will ring you back to conclude the payment. In that view it hardly matters that the company advised the US capital markets that they had an online payment ability.* People even reference this by pointing to Alexa traffic numbers. So I will do so before revealing the fault in that analysis.
Here is the Alexa page for CNUTG. It reveals that CNUTG is the 17,563rd site in the Alexa database and the 2,492nd site in China. If I compare it to www.check-in.com.au (a real, albeit minor, travel company in Australia) it checks out quite nicely. Check-in is the 1,893rd site in Australia. In other words – the bulls argue – www.cnutg.com is a real travel company albeit with a clunky website and lack of a payment mechanism.
There are fallacies in this argument. The main one is about the relevance of the Alexa database. Alexa provides data on global internet use by people using Alexa toolbars (or similar). This makes CNUTG the 2,492nd site in China of people whose Alexa toolbars are reporting data back. Alas Alexa data is notoriously inaccurate in China as the Chinese internet police block data from Alexa toolbars. Alexa toolbars thus bias Chinese sites to Chinese sites visited by non-residents of China. After all it is the Chinese authorities who monitor website usage in China – and they don’t much like other people doing it.
And that gives the game away… we are not tracking Chinese travel visitors. And it is not surprising that, of China sites, CNUTG is popular amongst non-Chinese. The stock is – after all – listed on the NYSE.
The Chinese Alexa
We can do much better – there is a Chinese version of Alexa which produces far more accurate data for China. That site is China Rank. It is in Chinese only – but it allows us to check out the web traffic per million internet users in China for the various travel companies.
Here is a comparison for Elong, CTrip, MangoCity, Qunar and the two main Universal Travel sites CBA-Hotel and CNUTG. Here is the link .
And here is a snapshot of the page in the original Chinese
And after the Google translator -
You are reading this right – the pages get 1 to 2 users per million internet users in China.
There are 420 million internet users in China – so these sites get about a thousand users in total (and presumably far less users daily).
The only problem is that the company has said in conference calls that it gets about 7 thousand to 10 thousand bookings per day. (They have implied but not confirmed that these are primarily through the website. They might be able to do this by not using the internet - but that is not how it sold the stock and is not consistent with the traffic numbers that the company claims for its website.)
The company claims to have taken 2.4 million flight bookings last year and sold 2.3 million hotel room nights. (Those claims were made by the former CFO at the March 2010 China Rising conference.) Presuming this was on the internet (as the company has implied many times) this is an unusual travel business – in that it sells approximately 1000 users 4.5 million individual bookings per year. That – if true – would be a lot of revenue per unique user!
[For reference: the company has stated in SEC filings that in 2006 the CBA-hotel.com site booked 500 thousand rooms on the internet. They have also stated several times that internet bookings have grown substantially since then. They are thus categorical that a large number of these hotel rooms are booked on the internet.]
I am racking my brain about alternative explanations. Again I asked the management if they could explain (but without response). The obvious explanation is that the bookings never happened (and hence the revenue of Universal Travel Group is fake).
That would of course be consistent with the other problems. For instance very limited sales is consistent with the dysfunctional website (making it hard to book), the lack of reasonable cookies on the website (which is not supportive of return business), the lack of customer acquisition cost (typically a major cost for such a business) and the lack of interest earned (which is supportive of the notion that the cash balances the company claims are not existent and hence the earnings are not existent).
A top 100 travel companies in China
China Rank also – conveniently – gives us the top 100 travel companies in China. The source is linked and the list is below. None of the Universal Travel Groups sites rank in the top 100.
Stating the obvious: if you can’t rank in the top-100 sites you are not a leading online travel company as per the stock promotion.
Postscript: The company has irregularly given different traffic numbers in SEC filings. Here is an example (from the last annual filing).
In August 8, 2007, we acquired Shanghai Lanbao Travel Service Company Limited ("SLB") in exchange for 200,000 shares of our Common Stock and interest-free promissory notes in the aggregate principal amount of $2,828,000, payable no later than August 8, 2008. The note has been repaid in full.
SLB was established in 2002 and its core business focus is a centralized real-time booking system providing consumers and travel related businesses with hotel bookings, air ticket and tourism information via the internet and mobile phone text-messaging technology. It owns and manages the award winning China Booking Association website, http://www.cba-hotel.com/, which receives approximately 200,000 visitors daily.
These numbers are about 100 times the Alexa traffic estimate and maybe 200 to 400 times the China Rank estimate of total users for the site.
*I should note that the company has provided some online payment ability since I wrote my initial post. This ability is limited and clunky. Other major problems with the sites remain – for instance the lack of cookies to appropriately manage return customers.
First postscript quantification: China Rank as far as I understand measures users. Alexa measures viewers in a particular day. In both cases however the usage is way too low to sell that many tickets. The distinction here is second order – but if I have glossed over it then I apologize. Whatever – I noted the visitors per day claimed by UTA for CBA-HOTEL (200 thousand) are 100 times Alexa estimates and 200-400 times China Rank estimates. The nuances in definitions of visitor numbers are small compared to these multiples.