That’s the free market working as it should. You under your own volition choose the trade offs between hotels and AirBnbs.

With externalities thrust upon the neighbors

I agree completely. AirBnb goes out of its way to allow hosts to skirt regulations.

The government’s job even with “free market capitalism” is to regulate the market to manage both positive and negative externalities.

It's like how Uber utterly murdered the taxi industry. That kind of thing simply doesn't happen to an entrenched incumbent market player who doesn't have it coming.

As for regulations, when regulations fail to keep up with reality, well, guess who wins. If you want to tell your neighbor what she can do with her house, I guess maybe you should've outbid her when it went up for sale.