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It’s been hip for years for many travel marketers to tout their use of WeChat, the omnipresent Chinese digital service app, as a way to reach Chinese tourists. But that quickly became imperiled when President Donald Trump issued an executive order that gave U.S. companies 45 days to stop engaging with WeChat allegedly over espionage and data security issues.
See the text of the August 6 executive order here. With the Trump administration sparring with the Chinese government over coronavirus and trade issues, he also banned in the U.S. the popular video-sharing app, TikTok, and opened up a path for a U.S. company to acquire TikTok’s operations stateside.
Many U.S. companies in the travel sector have courted Chinese visitors since 2017 by using WeChat, a superapp owned by tech giant Tencent. Several of them may now need to change their tactics.
“WeChat is more than a messaging app,” said Amit Anand, co-founder and managing partner at Singapore-based Jungle Ventures. “It’s a lifeline for over a billion Chinese residents and outbound travelers.”
Chinese citizens use WeChat to make payments in their cashless society, and they use it for person-to-person communication much more than email.
Federal authorities worry that the Chinese government might collect data via WeChat for espionage. Some say it also has fairness in mind in its WeChat criticisms and shots at other apps and Chinese businesses. China has long banned WhatsApp, Facebook, Twitter, and Google.
But the order may have implications for the travel sector. WeChat is one of the main digital marketing channels for reaching Chinese outbound travelers. For context, Skift Research subscribers can read the report, WeChat Marketing Strategies for Global Travel Brands.
“Taking away the fundamental mode of communication will be disastrous to the U.S. and potentially compel Chinese tourists to travel to other countries,” Anand said.
Tencent said it is “reviewing the executive order.” In its second quarter earnings call on August 12, the company noted its revenue from the U.S. is less than 2 percent.
It remains unclear how authorities and companies will interpret the executive order. One unknown: Will U.S.-based hotel chains with properties in China no longer be able to accept payment via WeChat Pay? If so, will that put them at a disadvantage to brands like Hong Kong-based Mandarin Oriental that in May rolled out an end-to-end marketing and engagement program via WeChat?
Some Chinese hotels use links on WeChat’s so-called mini-programs to enable a guest to open their room door with their phone, communicate with the front desk, and book future stays.
“There’s a missed opportunity for the travel industry outside mainland China in that Tencent has been investing heavily in a new business-to-business corporate tool and its own customer relationship management tool,” said Colman Ho, a Hong-Kong based entrepreneur who is a partner at travel tech advisory firm Genki International Partners. “While many U.S. travel brands were only using WeChat as a light promotional tool, they had been poised to take advantage of the next wave of utilities WeChat is developing for mainland Chinese travelers. Not now.”
A Headwind to Inbound U.S. Tourism?
The WeChat ban comes at a rough time for tourism between the U.S. and China. About 2.9 million Chinese travelers visited the U.S in 2018 before the trade war and build-up in tensions, said the U.S. Travel Association. Those travelers spent an average of $6,700 during their stays —roughly half more than other international visitors, the trade group estimated.
U.S.-based travel suppliers, destination marketers, and attractions might need to change tactics and stop using WeChat to try to reach this customer segment — even though WeChat is this segment’s preferred channel.
Marriott International is one of several U.S. companies that has used WeChat as a marketing tool to engage with outbound Chinese travelers visiting the U.S., and another WeChat account for employee retention and recruitment. Marriott declined to comment on the executive order’s impact. Hyatt and Marriott’s Sheraton brand have also used WeChat to stay connected with guests.
Several destination marketing organizations, such as Brand U.S.A. and Discover Los Angeles, have launched WeChat accounts in recent years that showcased their cities to Chinese visitors. They may have to review those efforts; their representatives couldn’t immediately be reached for comment.
Destination DC, the marketing firm for Washington, D.C., had one person tasked just on WeChat-related marketing out of the 90-person operation.
“We’re disappointed, but we’re not an eggs-in-one-basket kind of organization,” said Elliott Ferguson, president and CEO of Destination DC. “We’re already looking at alternatives to reaching this segment such as through popular tools like Weibo, Little Red Book (known as Red), and Douyin.”
A few U.S.-based museums, such as MoMA (the Museum of Modern Art in New York City) and The Art Institute of Chicago, have marketed to Chinese consumers via WeChat, especially during the pandemic, to stay top-of-mind for future trip planning, according to a Jing Travel webinar on Thursday.
The WeChat ban fits into a broader story of the frosting of relations between the U.S. and China. The story of one company’s complete about-face on serving this sector represents a broader industry shift.
While Boyd Group International has been a consultancy best known for aviation forecasting and research, it also had a division, China NiHao, that between 2016 and 2019 focused on expanding and selling WeChat apps to benefit U.S. airports, such as Las Vegas International Airport.
“For the security of personal data, we didn’t give it a thought,” said Mike Boyd, the company’s president. “We just saw WeChat as being a tool to increase visitors from China by making them more comfortable with airports and venues in the U.S. We were aggressively working to establish WeChat apps at airports as part of an array of efforts to make them more welcoming to Chinese visitors. As late as last August, we had Tencent as a sponsor and exhibitor at our annual International Aviation Forecast Summit in Las Vegas.”
But in the past year, things changed.
“Everything has now done a 180, big time,” Boyd said.
Boyd named several factors for the change. One included what he called “a Chinese crackdown on its citizens on all sorts of areas of expression and the implementation of a cult of personality for the country’s Premier Xi Jinping, and near-complete monitoring of all communication traffic, including WeChat.”
The U.S. trade war, a weakening in the buying power of the yuan for Chinese outbound travelers relative to the U.S. dollar, and tensions related to the pandemic haven’t helped.
“I do not dare use WeChat any longer to contact anyone I know in, or involved with, China,” Boyd said. “We cannot trust the Chinese government in having any potential access to any data.”
Boyd argued that the Xi government has been “actively and aggressively been denigrating the U.S.” in the past year. This trend has made tourism between the two countries less pleasant, Boyd said.
That denigrating, of course, does not take place in a vacuum: Witness Trump frequently referring to Covid-19 as the “China virus.”
Vendors at Risk
Several travel sector analysts described the WeChat ban as mainly an inconvenience for Chinese outbound travelers and the organizations that market to them. They expect workarounds to pop up soon from Alibaba, MeiTuan, Pinduoduo, Trip.com Group, Line Travel, and Paytm.
“Whilst added friction is not optimal, it certainly isn’t the end of the world,” said Fritz Demopoulos, founder of Queen’s Road Capital and a former CEO of travel search site Qunar. “Chinese consumers are used to all sorts of hurdles, whether they are foreign exchange restrictions, obtaining or renewing their passports, securing travel visas, language barriers, queuing up for VAT [value added tax] refunds (one of the worst experiences), and so on.”
More at risk are tech vendors that help travel companies, such as duty-free stores at airports, accept WeChat Pay as a form of payment or market to Chinese visitors via WeChat.
Citcon, a mobile payment company based in Santa Clara, California, that has raised more than $15 million to help connect U.S. businesses to Chinese consumers via their preferred technologies, one of which is WeChat, might see some projects stall.
“We are reviewing and assessing the implications of the executive order and anticipate more clarity to be provided later,” a spokesperson said, noting the company has been committed to building an open mobile payment system and that its solutions support more than 20 different mobile wallets and payment methods used by consumers in the US, Europe, and Asia.
The WeChat ban might also cause heartache for Chatly, a New York-based customer relationship management tool for Western marketers using WeChat, and Hylink Travel, the U.S.-based subsidiary of China-based digital marketing agency Hylink.
Potential Side Effects
Some travel players may worry that China may retaliate in some way that harms the interests of U.S. conglomerates.
“The Macau government had announced before this that there would be studies to evaluate the international public bid for the gaming concessions,” said Pedro Cortés, of Macau-based law firm Rato, Ling, Lei, and Cortés. “In case there is a bid, the U.S. interests may be at risk, which is kind of unjust for the U.S. players given the huge investment they have made in Macau — which also had a huge return due to the possibility that the Chinese government gave to Macau of being the sole place where gambling is legal within its sovereign territory.”
Some industry observers highlighted the potential effect on U.S. tourism from the ban. They echoed comments made on CNBC last week by Booking Holdings’ CEO and Glenn Fogel that he regretted the “friction” and risk of a “splinternet” that the ongoing tension between the U.S. and China has created.
India banned WeChat in late June.
“I worry the long-term effect of banning apps is that every region will start developing its own set of apps and global suppliers and resellers will have to deal with dozens and dozens of more channels,” said Kei Shibata, the Tokyo-based CEO and co-founder of Line Travel, a travel-price comparison service on Japan’s superapp Line.
“Restricting access to cross-border messaging services, like WeChat, will make international travel, in particular, more difficult for the traveling public across the world,” said Kurt Ebenhoch, executive director of the Chicago-based advocacy entity Travel Fairness Now. “Lawmakers should closely scrutinize public policy changes that would restrict cross-border communications and make travel more difficult for the flying public.”
The executive order might have unexpected legal, technical, or financial implications for travel companies. Take employee communication policies as an example. While experts said WeChat is more like using SMS (text message) than Slack or Microsoft Teams, U.S.-based companies might still have to take steps to make sure software engineers and other employees do not use WeChat with anything related to their work.
“In my personal opinion, Asia is a growing market, which is much needed to foster the restart of tourism in other world regions, both as a source market and a destination,” said Eric Dresin, secretary general of The European Travel Agents’ and Tour Operators’ Associations. “This fight between two superpowers is a very bad signal for the travel business worldwide in the short-term, at least.”