Any idea what hotels typically do in this situation? It's not exactly apples to apples but if you're going to make money by the same methods it seems within reason to play by similar rules.

> Any idea what hotels typically do in this situation?

They pay other hotels to take you in, and have insurance for the worst case (house burning down).

Yeah, the first thing they'd do is upgrade guests. So now the hotel is giving you the $250 room for your $150 per night. Then they look at nearby hotels they have an arrangement with, and send you to one of those. If there are no nearby hotels with inventory they'll refund you. In many hundreds of hotel stays I've never seen this happen even to another guest.

Also most hotels do a lot of corporate business. This mutual five star crap from the "sharing economy" doesn't fly in that world. Somebody's PA has a bad experience at your hotel? No more bookings from that whole company. So shady nonsense just becomes bad business anyway.

My suggestion is in these rare cases, it should be on AirBnB to relocate you. You already paid them plenty in the booking fee, some basic assurance that you will have a room to sleep in when you arrive should be part of that. Scammers will scam, but they will at least scam a victim (AirBnB) with the resources and incentives to root out the scam. In the current system, renters are stuck with such information asymmetry that they don't even know if they're being scammed or a pipe really did burst.

One of the reasons Airbnb is cheaper than hotels is that fraud and safety costs are passed on to guests and hosts. This is part of the business model. Once you build all the protections people want, you may find yourself at the same prices hotels were charging, and that's not very unicorn.

They're also cheaper than hotels because they allow people to exploit inventory that was otherwise sitting vacant. I agree that it's basically a form of regulatory arbitrage, but I'd argue that adding protections (as they already do for the property owners) is part of their competitive moat.

Also, like all new unicorn companies, they are doing business in an unregulated market. The wild west won’t last thats why they’re in the make as much money as fast as you can mode.

But a lot of people are ok with slightly increased risk for lower prices overall. When you need a sure thing, book a hotel.

I've used them maybe 3 times since they launched, but I always assumed that I did have this protection with AirBnB. I have had hosts ask me to avoid booking through the site and arrange payment outside the system, but I hesitated to do that because I figured the AirBnB fee paid for some "peace of mind" that I wasn't going to get shafted. If I wasn't buying that... what was the fee supposed to pay for?

Hotels fail empty, not overbooked. It is very rare that they can't take someone.

Rare, yes. I’ve had it happen and had it happen to colleagues but it’s been a while. And that’s on a pretty large sample size. Anecdotally better than it used to be.