Depends on who you are.
It worked terribly for people with young families or families that were over 4 people.
With young kids, you often what your own cooking/food preparation facilities. Sleep arrangements are often easier in a house too.
Ironically, it seems like hotels with food preparation areas are more common in Japan (weekly mansion/business type hotels).
That's specifically what I was replying to.
I live(and rent) in a city that is tourist based and less affordable because of airb&b and the like. It has a vacancy rate of under 1%. So i completely understand what you're saying. I just disagree that the market for staying somewhere worked well before airb&b.
Having stayed in a motel a lot over the last month, I'm pretty confident most parents could get 4-5 kids into most hotel rooms without management being the wiser.