Prediction of hotel booking cancellations: Integration of machine learning and probability model based on interpretable feature interaction

Reliable hotel cancellation prediction can help establish appropriate operational strategies for hotel management. In this sector, personal name records (PNR) data may be the most representative information source for prediction tasks. Despite the popularity of PNR, its inherent lack of availability has been commonly disregarded in the literature. Existing studies have directly input PNR into high-dimensional machine learning (ML) models to achieve cancellation predictions. Another type of model generates cancellation prediction based on the probability modeling of samples. In this study, we propose an interpretable feature interaction method to enrich the existing PNR information. Thereafter, we empirically assess the prediction performance of the two model classes. This study specifically determines whether or not the two methods can cross-fertilize each other to improve cancellation prediction. To do so, we propose a model integrating Bayesian networks (BNs) and Lasso regression for this prediction task. This study utilizes BNs for the probability model consistent with our correlated variables and dichotomous prediction setting. Moreover, we use a linear ML model (i.e., Lasso regression), given its advantages in reducing ineffective predictors and transparency for ranking feature importance. Empirical results show that the proposed integration model has better prediction performance, and the obtained BN estimators and interactive features are the most important predictors. This study contributes to the booking cancellation literature by proposing an interpretable feature interaction and a prediction method integrating two types of effective models. The obtained accurate and interpretable cancellation prediction further contributes to offering practical implications to hoteliers in managerial decision-making.