Originally Posted by xracer

You are absolutely correct. But here is a (perhaps) more salient point: cheap(er) rentals in some cities may get business from customers who would normally stay in luxury hotels.

I will use myself as an example: I will pay a lot of money to stay in a resort at a beautiful location. Mainly because I plan to stay at the resort most of the time. So to me, the high cost is worth it for the personal space, privacy and world class facilities.

But in a big city where I plan to spend most of my time touring anyway (like Paris), the hotel is less important to me. Of course, I would go 5 star if I thought the price was reasonable. But if not, I'm going to investigate other options. And this is the situation where I would totally look into Airbnb.

Of course, these kinds of rentals are nothing new - but sites like Airbnb and Homeaway have made it a LOT easier to get to them.