I don’t understand, how would AirBnB segmenting their marketing cause it to cost twice as much?

Imagine AirBnB and the low cost company both exist as you imagine. Now suppose AirBnB buys the low cost company and doesn’t change their marketing at all. Of course marketing ROI for each of the two segments doesn’t change. Compare this to the case where AirBnB operates in the two segments without buying low cost company. How are these cases different?

Furthermore, many of the major hotel chains have a bunch of brands, each of which caters to a particular demographic. Usually one or more of the brands cater to the price conscious and others are higher-end. If anything, there's an argument for AirBnB to have come up with more distinctive branding for a new product.

When a marketing budget that once served a uniform segment splits to serve multiple segments, you must either divide the budget amongst segments or increase the budget to support the previous standard of marketing activity for a segment.

Yes but, if you serve multiple segments vs. just one, you presumably can amortize your marketing dollars over more volume. (And if you're not increasing volume by going after more segments, those new segments obviously aren't working out for you.)

In this case the low end market becomes a drain on AirBnB because the ROI is not nearly as high as their high end market. However the ROI would be acceptable to a smaller player. Is it worth for AirBnB to dilute their brand at this critical juncture just to hold on to as wide a market as possible?

No.

"Introducing AirBnB: Simplicity. Clean sheets, great hosts, for a fraction of the cost of a hotel."

Game over^2.

AirBnB Simplicity, AirBnB, and AirBnB Plus? I don’t think so. I’d give that a D+ on execution.

Really? What about JW Marriott/Marriott/Courtyard by Marriott.

Edit: Marriott, across all of its brands, had nearly $23B in revenue last year. They're clearly doing something right by segmenting their brand.

Yes, but they also did not use Marriott Plus for obvious reasons. Marriott can fully control their brand segmentation, Airbnb cannot. As it stands there are plenty of standard Airbnb listings hitting far above the Airbnb Plus segmentation. In the end you end up with a plus but not a plus and a higher nightly rate. And now I'm laughing.

AirBnB is not a hotel company. They are a platform for people to list their homes for other people to rent for a short time. Never forget that.

valid points for sure