I think your perception of the competition is off. There are more than 100 million households in the u.s. alone.
I would be surprised if there are more than a few million hosts worldwide. The city I live in, Phoenix, has less than 2000 hosts. Out of over 2 million residences. That's under 1% of people doing air.
Now. When you have a small pool of people, and a percentage of them suck, even if it's a small percentage, it's easy for an outside group of observers to think "they all suck" so they're to be avoided. Much like someone else's example of used car salesmen.
If everyone was doing Airbnb, then there would be no issues finding places all the time. Too few people are offering their places up.
I'm looking for a place starting the 14th and only 3 places fit my need, in a big city (Denver, actually)