In theory, hotels should have a significant advantage over Airbnb. They can leverage economies of scale and are usually located in more tourist oriented areas of the city. I think the issue was that sort of like taxis hotels operated in a closed market and were competing against other hotels - sure motels existed but they were on the total other end of the cost-quality spectrum. They invested in fancy bars, and other stuff most people don't care about.
Then, Airbnb comes along and now you could pay a fraction of the cost of a hotel and have much better lodgings. It's worth scrutiny to see what percentage of Airbnb listings are operated full time vs. actually operating them in a sharing-econony fashion. But at a fundamental level, if Airbnb is growing so much we also need to examine why standard hotels aren't working.