Monday, September 30, 2013

The perils of misinterpreting conference calls - Universal Travel Group and Priceline edition

On 15 September 2010 I wrote the first of a series of blog posts which implied that Universal Travel Group was likely a fraud.

I am happy to be somewhat more direct now because the CEO, CFO and the company have settled fraud charges with the SEC for cash.

Still, not everybody agreed with the analysis and they pointed to a partnership with Agoda (a subsidiary of Priceline) which was announced on 13 July 2010. Moreover the CEO of Priceline in a conference call (3 August 2010) seemed to endorse Universal Travel.

To quote:
Douglas Anmuth (Barclays Capital, Research Division) 
First on the air tickets, you saw some modest re-acceleration, and I think, on an easier comp in 2Q, but can you talk about whether you're seeing any impact from higher airfares on leisure travel? And then, secondly, can you give us some more color on Agoda's partnership with Universal Travel Group and how you're thinking about this strategically going forward? 
Jeffery H. Boyd (Chairman, Chief Executive Officer) 
Dan, why don’t you hit the airfare, and I’ll do Universal Travel? 
Daniel J. Finnegan (Chief Financial Officer, Chief Accounting Officer) 
Doug, we are seeing some softness in airline ticket demand, given the increase in airfares, and we also see some impact for our Domestic business on online advertising expense as a percentage of gross profits. So those higher prices are driving more clicks as people shop more and try and look for better prices out there. So we are seeing some impact from that. But again, just to emphasize that airline tickets are a pretty small part of our total gross profit, and what we're seeing there in terms of softness is built into our forecast for Q3. 
Jeffery H. Boyd 
And with respect to Agoda and Universal Travel, they're building their distribution through other travel websites in the region, and I think this just represents their continued progress on that front.

And so people thought (incorrectly) that Universal Travel were building their distribution and that the deal was real.

In reality Agoda was happily allowing other people to display their hotel inventory and the Priceline CEO thought that this was one-of-those-deals. His answer relates to Agoda. At least I think it does. (Other people had a different opinion... but that opinion now requires that you think that Jeffery Boyd was a participant in the Universal Travel fraud... something that seems unlikely.)

In retrospect Jeffery Boyd probably should have given a more precisely worded answer...


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