You can find this pattern in other markets, like online dating. A lot of people were initially hesitant (and still are), so there are social forces at work. Once the lid comes off that, I think it'll blow up.
I have the urge to box Airbnb into this "paid couch-surfing" category, but that's not really what they are. They positioned their company as something greater than that: all of the services that went along with their experience. Funny enough, the investors didn't buy it because they were tunnel visioned by how big it could be and whether it would scale at the seed stage. Those are the wrong questions to be asking at seed, and actually I don't think many founders could have pulled off starting Airbnb. The team clearly was the overriding factor in Airbnb working, followed by their excitement to be doing that startup.
I liked the Subject: Airbnb "essay" which showed how true this was (http://paulgraham.com/airbnb.html).
Why is it so flatly awesome? My experience was: overpriced room (overpriced because the high airbnb fees get passed on to the person who stays), annoying extra "cleaning/deposit" fees that don't get refunded (and you're not notified that they didn't get refunded), and a quasi-too-personal system of booking where half the listings are by weirdos ("RENT A ROOM IN MAH CAMPER ON THE STREET!") you can't filter out or fake listings nobody responds to.
It's squarely not in my "things that make me happy" column.
I came to Airbnb with prior couchsurfing experience. You learn how to distinguish good listings from bad. Every single one of my Airbnb experiences has been both inexpensive and awesome.
Some markets are tougher though. Manhattan is extremely expensive. Most other cities seem fine.
(Granted, it was something like a fifth-floor walk-up, and the neighborhood was a little gritty, but in the edgy-up-and-coming cool-if-you're-into-that sort of way and not the help-get-me-out-of-here fear-for-your-life drug-dealers-on-the-doorstep kind of way.)
I can only expect that I'd be out another few hundred bucks if I used a traditional hotel.
Irrational exuberance of startups around here tends to get out of hand. I get it. Everybody is the friend of a rich person and you want to promote them because you know them. hi-5's and bropong all around. Great. But they're still delusional. Gotta speak truth to ego-elevating unrestricted happiness. Life is pain, not million dollar post-exit condos in SF.
The cleaning fees had some wording like "if necessary" or "if damage is done," but it was never returned or communicated nothing would be returned.
(Sidenote: There's also no recourse or discount for "weirdness." The lady whose second bedroom I rented had her non-english-speaking mother stay for two weeks (unannounced, unasked--suddenly there was just someone new living there) whose hobbies included power sanding furniture starting about two hours before daylight and taking up the entire kitchen for five hours a day.)
The response rate things are okay, but there are still tons of people who cannot communicate effectively online (or even form coherent thoughts in person most days). It's a crapshoot. (Kinda like trying to sell things on craigslist -- you never realize how many weirdos are out there until you have something they want. "Yoooooo maaan... will you take some pot for tha xbox? we aint got no monay.")
Hell, I'm not comfortable reviewing an air mattress I bought on amazon.
http://gawker.com/5853754/the-seedy-spammy-past-of-airbnbs-c...
(including, but not limited to: rampant cross-site promotional spam, dead baby jokes, rambling on about how you overcame such adversity all the way from your $40,000/year private high school, follow-the-bouncing-ball upvote rings to promote insiders higher on the front page of Marketing To Nerds and Journalists Daily, and becoming an apologist for other people abusing/lying/cheating/stealing/manipulating things now that they are successful and you're afraid of them politically.)
They're not nice people.
That friend in Illinois was very uncomfortable with the idea of sleeping in some random person's house, and I didn't realize how absurd it sounded until I was listening to myself explain it to him and his very uncertain reaction. The reputation/trust element removes that "randomness." So much so that I won't book with listings that don't have any reviews, and I tell my friends the same thing.
Personally, I think the "weird factor" around AirBNB will probably be harder to erode than the one around online dating. I think the existing hotel industry comes a lot closer to meeting a wide range of people's needs for accommodations than the standard informal "go out to a bar or meet people through mutual friends" thing does, and for someone like me, who travels fairly infrequently, I don't mind spending more once or twice a year to have that extra identity/trust from the known quantity of an actual hotel.
[1]"A lot of people were initially hesitant (and still are)"
Airbnb seems very cool as a user of the service, but I'd almost never even think of being a host.
They just need X% of people who haven't hosted to start hosting.
There's a large amount of people who haven't given the matter as much thought as you have. Some will decide differently.
I'm 27. Most people I know have not stayed in an Airbnb rental, or considered becoming hosts. They haven't heard of it, or they're reluctant to stay with a stranger.
Eventually, positive word of mouth will convince them to try. They just have to like it once and they'll do it again.
Friedman tried to paint Airbnb as massive, but all I can think about it how tiny it still is compared to the global hotel industry.
You may say that for use case X, a hotel would be better. Fine. But I'd estimate 80% of the market hasn't tried Airbnb, and X% of them will switch once they do.