There are regulatory mechanisms to make hotels and B+Bs pay their share of externalities. These are things like property tax, room tax, and insurance. Supplier

There are regulatory mechanisms to make hotels and B+Bs pay their share of externalities. These are things like property tax, room tax, and insurance. Suppliers of airbnb units avoid a lot of these payments because they're paying taxes at normal residential rates. If the cost of a room is $100/night, and the cost of that extra stuff is $50/night, then there is no way that hotels can compete on an even playing field with airbnb.