Excellent comments all around; certainly not much for me to add!
Just one observation -- I suppose the rather minimal 'entry requirements' within the hosting industry (i.e. an inexpensive reseller account) make it rather easy to start a (and perhaps eventually fail with a) hosting enterprise. That said, I wonder if the seemingly high failure rate isn't so high after all -- I've heard various numbers cited before regarding the failure rate of any business (particularly small businesses), and it seems that hosting isn't really too different from virtually any other business. So, I guess I'm just pointing out that starting and operating any type of business is difficult, hosting not being too much of an exception.
On the more marketing end of things (and - uh oh - I'm revealing a bit of our business strategy!) I think the businesses that ultimately survive through 'thick and thin' are those who see 'beyond the benefit.' Superior quality, excellent support and good pricing, for the sake of providing benefits to the customer, will get you a long way, but honestly I don't think it's enough if the market gets tough. The 'beyond the benefit' part, in my humble opinion, is founded in recognizing the very special nature of our type of business as the digital 'printing presses' of sorts for peoples ideas, hopes, dreams, and goals. When you can prove, day in and day out, that you recognize that and run your company on that more 'human' basis, then I think you've got the ability to survive through almost anything, because you have truly loyal customers.