When it comes to high end home automation systems, the ones that are professionally installed and typically cost 10% of the value of the home, most of those actually do use zigbee, such as control4.
For low-cost DIY installations, Z wave was preferred up until about three years ago for two reasons.
One) as already mentioned, Wi-Fi doesn’t drown out zwave. That makes it way easier to place the devices in a typical US home, particularly fixed location devices like wall switches, door locks, and window coverings. Sensors aren’t the same issue because you can usually just move them a couple of feet to the right or left.
Two) Z wave only has a single profile, which means pretty much any certified Z wave device will work with any certified Z wave controller for at least basic on/off/dim. Each device will tell the controller its device class at the time of joining and the controller will assign the device ID. The standardization just makes it much easier to build up a network over time little by little, which is how many DIY projects are done.
Zigbee allows for many different profiles and they aren’t all interoperable. In addition, each device comes with its own fixed ID which could complicate matters because the coordinator has to be pre-programmed to recognize it. The combination of these two factors mean you are more likely to find zigbee in devices which are sold as a kit with the controller pre-programmed for those specific devices. It also means it’s way easier to buy a “zigbee” device which will not work with your home system, which is very frustrating for consumers. ( just as a practical example, Lowes sells the line of home automation equipment called Iris. All the Z wave devices work fine with SmartThings. The first generation zigbee devices don’t work with SmartThings and cannot be made to. The first model line of the second generation Zigbee devices do work with SmartThings out of the box. The second model line of the second generation zigbee devices don’t work with SmartThings out of the box, but can be made to, so Lowes has them marked as not compatible with SmartThings even though they actually are. 
That right there encapsulates the reason why Z wave has been more popular for low-cost home automation systems. It just reduces the number of customer support headaches significantly. 
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Smartthings was very unusual in allowing customers to upload their own device type handlers, allowing them to add additional zigbee devices which smartthings the company had not pre-programmed into the hub. Most other home automation systems make customers wait until the company has added the device specifications to their libraries.
You put those two things together, and Z wave is just a simpler low-cost DIY solution. You don’t have to worry about Wi-Fi interference and you can add devices little by little over time and still have pretty good confidence that they will work with your system.
But Z wave doesn’t scale up as well as zigbee does, so you do find more zigbee in large commercial installations, including office buildings, hospitals, and hotels. But those are professionally installed and the installers have network diagnostic tools that help with deployment.
There’s also a separate zigbee profile just for lighting systems, particularly for smart bulbs, and fir technical reasons that one happens to work very well for DIY projects. So you do see a lot of zigbee lightbulbs sold. 
http://thingsthataresmart.wiki/index.php?title=Z-wave_versus_Zigbee
Both protocols are good, it just depends on the specific requirements for anyone installation. 