I’m looking into hosting one of these for the first time. From my limited research, XMPP seems to win in every way, which makes me think I must be missing something. Matrix is almost always mentioned as the de-facto standard, but I rarely saw arguments why it is better than XMPP?
Xmpp seems way easier to host, requiring less resources, has many more options for clients, and is simpler and thus easier to manage and reason about when something goes wrong.
So what’s the deal?
You are basing your experience on Pidgin, which is the worst possible choice for an XMPP client that hasn’t been updated in over a decade. Other XMPP clients are relatively modern looking and easy to use, including encryption (probably easier than Matrix for most users).