I don't understand your analogy. One case involves making yearly payments regardless of use, while the other involves only paying when you use it. But from here it looks like cloud is to colo as hotel is to timeshare (or purchasing property).

As a small startup I'm happy to host in the cloud because it removes a lot of the up-front risk of buying physical hardware. Just as I get a hotel when I go on vacation because I don't want to purchase a beach house outright. But at scale, the economics change and it most likely goes the other way.