The hotel business is largely focused on the business traveler as their primary market. They only really build for pleasure-travel in non-business markets (see all the Condos available on Maui, or the Hyatt House hotels in Anaheim and Orlando, which have bunk-bed rooms for kids, etc.) AirBNB fell into serving this market, and it's served them pretty well, especially since they were priced below hotels to begin with, and pleasure travelers are much more price-sensitive than business travelers.