Gary Rowett's men are currently eighth in the Championship.
Following the hugely impressive 3-0 away victory over automatic promotion contenders Derby at the weekend, the Blues currently sit eighth in the Championship, two points off the top six. Nevertheless, Holloway is predicting that the Midlands club will ultimately come up short this season.
"Birmingham have been fantastic under Gary Rowett but may struggle due to their inability to keep hold of their best players," Holloway told Sky Sports.
Birmingham have already lost one of their most promising talents during this current window, with Demarai Gray joining Premier League high-flyers Leicester City for £3.75m (via Daily Mail), and while the winger is the only high profile name to leave St Andrew's this season, the departures of some of their brightest prospects has become something that Blues fans have had to get used to in recent years.
In the past, the likes of Jack Butland and Nathan Redmond have emerged onto the scene before swiftly moving on before their potential has been completely realised.
And Holloway believes that once again, it is their failure to hold onto their star player that will see the club remain in the Championship for another season.