Predicting hospitality firm failure: mixed sample modelling

Abstract

PurposeAvailable information for evaluating the possibility of hospitality firm failure in emerging countries is often deficient. Oversampling can compensate for this but can also yield mixed samples, which limit prediction models’ effectiveness. This research aims to provide a feasible approach to handle possible mixed information caused by oversampling.Design/methodology/approachThis paper uses mixed sample modelling (MSM) when evaluating the possibility of firm failure on enlarged hospitality firms. The mixed sample is filtered out with a mixed sample index through control of the noisy parameter and outliner parameter and meta-models are used to build MSM models for hospitality firm failure prediction, with performances compared to traditional models.FindingsThe proposed models are helpful in predicting hospitality firm failure in the mixed information situation caused by oversampling, whereas MSM significantly improves the performance of traditional models. Meanwhile, only partial mixed hospitality samples matter in predicting firm failure in both rich- and poor-information situations.Practical implicationsThis research is helpful for managers, investors, employees and customers to reduce their hospitality-related risk in the emerging Chinese market. The two-dimensional sample collection strategies, three-step prediction process and five MSM modelling principles are helpful for practice of hospitality firm failure prediction.Originality/valueThis research provides a means of processing mixed hospitality firm samples through the early definition and proposal of MSM, which addresses the ranking information within samples in deficient information environments and improves forecasting accuracy of traditional models. Moreover, it provides empirical evidence for the validation of sample selection and sample pairing strategy in evaluating the possibility of hospitality firm failure.