This isn't about travelers leaving the site if they can't instant book. Travelers want to use Air because they are usually getting a bargain even with the service fee. All these listings sites like to tout "but the traveler is demanding it" - blah blah blah.
The truth is that Air guests are willing to go through a (sometimes frustrating) verification process just to use the site. So if everyone truly just wanted instant book, they could go to booking.com for that, and not even be bothered with getting verified. And if travelers were demanding instant book...then non IB listings would hardly get any bookings.
But Air knows if they allowed the market to dictate who gets the bookings...travelers are still going to choose non IB listings. That is the reason Air has to hide non IB listings and trick consumers into thinking they are viewing all the possible available properties. Be wary of any site that hides listings, and manipulates the searches under the guise of benefiting the traveler.
It's all about Air's bottom line. Instant book converts lookers into bookers. Air could care less if your guest understands anything about your house rules. And once they get enough people to sign up for IB to get better search placement, they will introduce something else. After all, if everyone is on IB - then NO ONE benefits in search placement. So the next move will be to place flexible higher in search, etc.
Completely agree with you florborne.