This is a highly unusual action. It's unclear why the U.S. government would believe a company would compromise the sensitive personal data of U.S. citizens just because it's based in China.
The Trump Administration on Friday demanded that Beijing Shiji Information Technology, whose international arm is known as Shiji Group, unwind its acquisition of StayNTouch, a maker of hotel operational software.
President Donald Trump said the acquisition of the U.S.-based startup might “threaten to impair the national security of the United States.” The order didn’t explain details of the threat.
A spokesperson for Shiji Group gave us this statement Friday afternoon:
“Beijing Shiji Information Technology is disappointed by today’s Executive Order. We believe President Trump’s decision was incorrect. Shiji is not a threat to U.S. security in any way. The U.S. government did not adequately explain the basis of its decision to us. In fact, Shiji does not access the guest data of StayNTouch Inc.’s customers.”
“We offered a range of significant proposals to mitigate any concerns the U.S. Government might have, including further restricting access to guest data and appointing an independent monitor to ensure these protections,” the spokesperson said. “Unfortunately, those offers were rebuffed.”
Shiji Group acquired StayNTouch in 2018. As Skift first reported, Shiji paid $33 million to buy out a remaining 77.4 percent stake in StayNTouch. The company had paid about $2 million for its earlier stake.
Shiji Group made StayNTouch the flagship service in its suite of international offerings for hoteliers. StayNTouch offers a cloud-based property management system, a core operational piece of software for hotels that helps managers track reservations and room inventory.
Shiji, the largest hospitality tech company in China, has been making a global hotel tech push since early 2018 after it announced a $486 million investment from e-commerce powerhouse Alibaba Group.
Shiji now serves many properties outside of China, including more than 29,000 hotels in Europe, and nearly 7,000 hotels in the Asia-Pacific region leveraging Shiji’s technology.
Shiji has about two dozen foreign subsidiaries, such as Concept Software Systems, which it bought in 2018 for $5.8 million as a retail tech provider for golf, spa, and other activities, and IcePortal, a digital asset management service for hoteliers it paid $13.5 million to acquire in February 2019. See our recent article: Shiji’s Hotel Tech Acquisition Spree: A Closer Look.
Shiji Group also helps companies like Marriott gain customers in domestic China.
For example, last year, Marriott International debuted its 6,000 hotels on Alibaba’s online travel agency Fliggy. Fliggy customers can use its credit-based hotel payment service, which lets qualified travelers reserve hotels without paying a deposit and have an express check-out, at more than 1,000 of the properties — thanks to Shiji’s underlying tech.
We asked the top boss at Shiji Group, Chief Operating Officer Kevin King, at Skift Tech Forum in June 2019 in San Francisco, about the U.S. government’s concerns with doing business with Chinese-based tech companies:
Skift: Some U.S. officials are warning American companies to be careful about using Chinese-based tech providers. Do you feel that’s a potential headwind for Shiji?
Kevin King: There may be some noise in the market about that. So far: We’ve not experienced any barriers in working with people. I suppose one of the reasons for that is that one of the very big markets is China. Partnering with companies that are in China, companies that have the depth and knowledge and the ability to deliver in a very different land find it becomes a positive.
The Trump Administration order comes after a blow last week when Oracle Hospitality, the world’s largest provider of hotel property management systems, decided not to renew a longstanding agreement where Beijing Shiji Information Technology resold Oracle’s software to hoteliers within China.
In China, Shiji is responsible for at least 60 percent of the market share for enterprise software services among upscale and international hotels and luxury retailers. About 13,000 Chinese hotels use Shiji-networked systems, including many global brands with operations in China.
Oracle Hospitality is increasingly a competitor with Shiji Group in international markets.
On February 13, new regulations went into effect thanks to a law that gave additional review scope the interagency Committee on Foreign Investment in the United States, or CFIUS. “Transactions involving critical technology and infrastructure or operations that collect sensitive personal data on U.S. citizens and the degree of foreign control of those arrangements” are key concerns. Several U.S. government agencies have a say in CFIUS, including the treasury, defence, state, and commerce departments.
Here is Kevin King at Skift Tech Forum:
Free Daily Newsletter
Sign up for the most popular Skift daily download of news, happening, and headlines in the travel world
Photo credit: Kevin King, chief operating officer of Shiji Group (left) spoke to Skift Senior Travel Tech Editor Sean O'Neill at Skift Tech Forum June 2019 in San Francisco. The Trump Administration on Friday demanded that Beijing-based Shiji unwind its acquisition of StayNTouch, the hotel property management system. Skift