Yes, I agree, the law hasn't caught up with how people want to use their boats. We've actually got half a dozen properly licensed airbnb boats in the capital, now. CRT state pretty clearly on their website what the requirements are. You need a residential lettings license for the boat and a commercial bss and commercial insurance. You need a residential mooring.
If it moves and you're onboard with your guests, then you are a hotel boat, you need the relevant license and a boatmasters ticket. Plus insurance, commercial bss etc.
You have to submit a business plan for either of these, to their business boating team.
Yes, people do run these boats 'under the radar'. But some are really dangerous. I disagree with Nigel Moore that Trotman on the Thames had favourable reviews, most of them were dreadful, the boats don't have running water or electricity. Guests complained about the long term residents fighting and using drugs, filth and junk piled up everywhere, the was only a barbecue to cook on and the cabins were awful ( they looked like somewhere you'd keep a hostage).
I've just reported an incredibly dangerous one on the canal, to CRT.
The landlord was encouraging guests to use the hob and oven to heat the boat, plus a camping stove ( the kind that uses canisters) all the time whilst having a leaky petrol generator onboard. Neither the landlord or the guests knew about CO. The guests complained of cold and damp despite having the oven on all night. They were given candles to use, despite there being a strong smell of petrol and gas onboard.
This is why they want to interview you and check the boat, to make sure that idiots don't gas or blow up their guests.
As its mostly total newbies doing this ( who often don't know anything about boats and safety), then I'm not surprised if they turned the OP down. I've seen some terrible ones, owner fit-outs that would fail a normal b.s.s. Never mind a commercial one. Burners installed ontop of wooden pallets, not fixed down, too near the cabin sides, kindling stuffed around them, boats that are falling apart, only fit for scrap. Its slumlording.
If you want to run a business boat, then understand the responsibility and why they want to meet you and make some checks. Maybe learn a bit about boating first, then go back to their business boating team, with a proper plan.