Using machine learning methods to predict future churners: an analysis of repeat hotel customers

Abstract

Purpose This study aims to predict customer churn in resort hotels by calculating the churn probability of repeat customers for future stays in the same hotel brand. Design/methodology/approach Based on the recency, frequency, monetary (RFM) paradigm, random forest and logistic regression supervised machine learning algorithms were used to predict churn behavior. The model with superior performance was used to detect potential churners and generate a priority matrix. Findings The random forest algorithm showed a higher prediction performance with an 80% accuracy rate. The most important variables were RFM-based, followed by hotel sector-specific variables such as market, season, accompaniers and booker. Some managerial strategies were proposed to retain future churners, clustered as “hesitant,” “economy,” “alternative seeker,” and “opportunity chaser” customer groups. Research limitations/implications This study contributes to the theoretical understanding of customer behavior in the hospitality industry and provides valuable insight for hotel practitioners by demonstrating the methods that facilitate the identification of potential churners and their characteristics. Originality/value Most customer retention studies in hospitality either concentrate on the antecedents of retention or customers’ revisit intentions using traditional methods. Taking a unique place within the literature, this study conducts churn prediction analysis for repeat hotel customers by opening a new area for inquiry in hospitality studies.