Having just come back from an airbnb stay in NYC (Not an illegal one, landlord was living in the apartment) I can tell you that I simply wouldn't have gone had I had to rely on hotels. The price in Manhattan was eyewatering enough as it was at $80pppn with airbnb, the hotels were more like $110pppn + tax.
However, for that money we had a lovely host, who provided us with everything we asked for and plenty we didn't, like a welcome hamper. He gave us tips on where to go, and looked after us really well. With our friends staying in a hotel, they reported that they were forced to wait 2 hours (at 1am) for a hotel room as theirs had been double booked (despite their guarantee), wifi was $25 a day, and they were given nought but a free croissant for their trouble at check-in. Service, eh?
Much like the NYC taxi medallion insanity has been stemmed by uber, (they don't cost $1m a year anymore - a price that was being passed to the general public), the hotel industry could do with a royal kick in the ass and buck-up their ideas. I wish airbnb all the best with their suit. As far as I'm concerned, if you have an apartment, you should be able to do whatever the hell you like with it without some encumbant hotelier sticking their noses in.
I mean, maybe Starbucks should be able to fine you $3 every time you boil a kettle when you have friends around, because you're eating into their profits because your water supply doesn't have to abide by regulations that apply to them. Or have Subway pass a law that says you can't make sandwiches for yourself and the kids if you only do it once a week. How is this any different?