We went to the Gower in South Wales for years when the kids were little. We love it there, and although we haven't been since 2004 I can see us going again. We also love narrowboat holidays, we used to do this every year until the kids came along. We have taken them on two boat holidays now (including this summer) and they love it. Having said that we also took them to Florida last year and are going again next year, but this will be the last time as our eldest will be 16 next year, and also we won't be able to afford it again. I'm quite happy to pootle round the canals though or to visit some of the beautiful places in this country.
I agree with you that some people prefer to holiday abroad, the weather is the big draw there, though I'm sure if you asked everyone say in your street then you would find that there are still a hugh proportion of people who holiday in the UK.
Cost may come into it, but I think also the fact that we have a beautiful country with a lot of diversity so there is always somewhere that suits someone, whether it's beaches, seaside towns, moorland, mountains or gently rolling countryside.