Investors' underestimation of Airbnb is a well-documented phenomenon, and many have expressed regret for not recognizing the platform's potential early on. Here is a detailed answer explaining why investors underestimated Airbnb, along with examples and references to support the argument:

1. Lack of understanding of the sharing economy: When Airbnb emerged in 2008, the concept of the sharing economy was relatively new and unfamiliar to many investors. Sharing economy platforms like Airbnb challenged traditional business models, and investors struggled to comprehend the potential impact of these disruptive platforms. Consequently, they failed to recognize the transformative power of Airbnb's peer-to-peer accommodation model.

2. Dismissal of the market size: Initially, investors overlooked the potential market size for Airbnb. They saw it as a niche platform for budget travelers, rather than a broader alternative to traditional hotels. However, Airbnb's exponential growth over the years has proven otherwise. As of 2021, Airbnb operates in over 220 countries and regions, with millions of listings and a diverse range of accommodations, catering to various travel segments.

3. Underestimating consumer demand: Investors underestimated the demand for unique and authentic travel experiences that Airbnb offered. They failed to recognize the changing preferences of travelers who sought more personalized and local experiences, rather than standardized hotel stays. Airbnb's ability to tap into this demand and provide a platform for hosts to offer unique accommodations and experiences has been a key driver of its success.

4. Regulatory challenges and resistance: In the early days, Airbnb faced significant regulatory challenges and resistance from various stakeholders, including hotels, municipalities, and regulatory bodies. Investors may have been deterred by the uncertainty surrounding Airbnb's ability to navigate these challenges successfully. However, Airbnb demonstrated resilience and adaptability, working with governments and implementing various measures to address concerns, ultimately gaining wider acceptance.

5. Failure to anticipate scaling potential: Investors often underestimated Airbnb's ability to scale and expand beyond its initial offering of spare rooms and apartments. The platform's evolution into a full-service accommodation provider, offering entire homes, boutique hotels, and even unique experiences, caught many investors off guard. Airbnb's ability to continuously innovate and adapt to market demands has allowed it to expand its offerings and attract a broad customer base.

Examples and references:

1. Lack of understanding of the sharing economy: The Harvard Business Review published an article in 2014 titled "The Sharing Economy Isn't About Sharing at All," highlighting the challenges investors faced in understanding and valuing sharing economy platforms like Airbnb.

2. Dismissal of the market size: In 2017, Airbnb surpassed 4 million listings worldwide, surpassing major hotel chains like Marriott International and Hilton Worldwide in terms of available rooms. This growth showcased the platform's ability to cater to a wide range of travelers and highlighted the underestimated market potential.

3. Underestimating consumer demand: A study conducted by Boston University in 2017 found that Airbnb's entry into a market led to a decrease in hotel revenue, indicating the strong demand for alternative accommodations. This research demonstrated the underestimated consumer demand that investors failed to recognize.

4. Regulatory challenges and resistance: Airbnb faced significant regulatory challenges in cities like New York and San Francisco, where restrictions were imposed on short-term rentals. However, Airbnb worked with governments to implement regulations and tax collection mechanisms, showcasing its ability to adapt and address concerns. The agreements reached with various cities, including Paris and Barcelona, demonstrate Airbnb's commitment to regulatory compliance.

5. Failure to anticipate scaling potential: Airbnb's expansion into the boutique hotel sector with the acquisition of HotelTonight in 2019 showcased its ability to scale and diversify its offerings. This move surprised many investors who had underestimated Airbnb's potential to expand beyond its initial peer-to-peer accommodation model.

In conclusion, investors' underestimation of Airbnb can be attributed to a lack of understanding of the sharing economy, dismissal of the market size, underestimating consumer demand for unique experiences, concerns over regulatory challenges, and failure to anticipate Airbnb's scaling potential. These factors, along with examples and references, highlight why investors regret not recognizing Airbnb's potential earlier.