Solving the problem of class imbalance in the prediction of hotel cancelations: A hybridized machine learning approach

Abstract

The cancelation of bookings puts a considerable strain on management decisions in the case of the hospitability industry. Booking cancelations restrict precise predictions and are thus a critical tool for revenue management performance. However, in recent times, thanks to the availability of considerable computing power through machine learning (ML) approaches, it has become possible to create more accurate models to predict the cancelation of bookings compared to more traditional methods. Previous studies have used several ML approaches, such as support vector machine (SVM), neural network (NN), and decision tree (DT) models for predicting hotel cancelations. However, they are yet to address the class imbalance problem that exists in the prediction of hotel cancelations. In this study, we have shortened this gap by introducing an oversampling technique to address class imbalance problems, in conjunction with machine learning algorithms to better predict hotel booking cancelations. A combination of the synthetic minority oversampling technique and the edited nearest neighbors (SMOTE-ENN) algorithm is proposed to address the problem of class imbalance. Class imbalance is a general problem that occurs when classifying which class has more examples compared to others. Our research has shown that, after addressing the class imbalance problem, the performance of a machine learning classifier improves significantly.