While wood coasters are cool and rickety and classic and all that, I have to agree with those who say steel coasters are more diverse. Wood has certain limits as a building material, which means that unless you want to be dangerously experimental, if you choose to go for wood you have a lot fewer options as to what your coaster can do. Inversions are usually out of the picture, you have to place footers and supports all over the place, and your ride will get a very distinctive look, limiting its uniqueness if you get what I mean. Painting a woodie requires a humongous amount of paint (and time), and choose the wrong colour and it'll end up as a bit of an eyesore. Aesthetically, it seems like woodies can be natural in colour or painted white, so that means that one woodie usually looks a lot like very many others out there. You're stuck with a few colour schemes and the support structure will look the same almost every time, unless it's using the terrain exceptionally well. Add to this that it rides pretty much the same as most other woodies, and it all boils down to woodies being perceived as rigorously unflexible. If you've got one of them already (or there is one in a nearby park), you won't have much of a sales argument when marketing the other. If a park wants to offer its parkgoers a diverse experience, they probably shouldn't buy another woodie before the one they've already got has grown quite old. A woodie is perceived as a single coaster type along the line of floorless ones, inverts, spinners, Dive Machines... you get the picture.
This leads into another interesting point: Look up a timeline of "world's first" for coasters. You'll find that all launching coasters, inverts, floorless coasters, Dive Machines, Eurofighters, Wing Coasters, 4Ds and probably a many other mainstay design categories all debuted within the past 15-20 years. Simply put, there are a LOT more types of coasters to choose from now than there was 25 years ago, and when woodies are considered a single ride type the same way spinning coasters are, it's only natural that the woodies' share of the pie shrinks. It's not competing as a material, but as a ride type, and there have become many more ride types in the pool in recent years.
There's also another point with woodies: Size. Even a comparatively tiny woodie is still many times bigger than a small kiddie steel coaster. I daresay you can't build a "true" woodie kiddie coaster (though I suppose it is possible, but no standard manufacturers seem to provide the necessary narrow-gauge trains, among other things). Whilst the fans tend to notice the big coasters the best, fact remains that most of the coasters in the world are quite small. More parks order small coasters than big ones, and small coasters are usually made out of steel (though I suspect we might see some made of polymer composites in the not-too-distant future). This is an entire category of rides that woodies can't compete in, and it just so happens to be the biggest category too, by numbers.
It's not all doom and gloom, though. Wooden coasters tend to be cheap, distinct and marketable enough that they will usually find their way to a park's lineup sooner or later. Most parks that have big steel coasters (which, when you think about it, is a minority) seem to get a wood coaster or two too. They're not overwhelmingly exotic or complex, they provide fun for all ages by virtue of not being extreme unless you build them very big, and they're not that expensive to make. I wouldn't say that woodies are on the decline in the grand scheme of things, just that they are competing (and staying afloat) in a much bigger market. Woodies may appear to be on the decline, but rather I think everything else is on the rise, and since the share of woodies is higher among the aging, about-to-be-decomissioned group of coasters, it's only natural that the numbers go down for a short period. They will probably stabilize in a few years.
