Bruce, the newly appointed Aston Villa manager would have been the perfect fit for England, according to Holloway.
"This is England's loss, Aston Villa's gain, massively," Holloway told 'Sky Sports'.
"I'm disappointed Bruce didn't get the England job. I think he's a fantastic bloke, who has achieved so much in the game. He was the perfect candidate and would have slotted in there like a glove after the Sam Allardyce situation.
"I've got nothing against Gareth Southgate but he was doing a fine job with the under-21's - why change it?"
Bruce was interviewed for the position when it was offered to Sam Allardyce, but didn't appear to be in contention for the job when Allardyce was controversially sacked.