I don't know anything about air miles because they're only really an option if you can fly from a London airport but obviously they're not going to help with the cost of an AI hotel.
You'd also need to consider whether they genuinely save money or just get a discount off a more expensive flight to bring it down to the cost of a cheaper one as you can fly to Barcelona for under £100 with Easyjet etc.
I think a lot of people who get a lot of air miles do so via their job because otherwise you'd need to spend a lot of your own money to get a meaningful amount to use, so if that was the case, you'd not be worrying about the cost of a holiday. But obviously not everyone has the chance to get air miles through work and they might not be allowed to keep them for personal use if they do - this is specifically banned in my work travel policy for example.
As for how your friends can afford holidays when you can't it will be either that they have more money than you think (inheritance, earn more, there can be huge variation in what 'similar jobs' pay), holidays are paid for by someone else, eg grandparents, or they spend less in other areas and use that money to pay for holidays, eg if their housing costs are lower, or they're more frugal in other areas - there's so many things where the amount of money that people spend can vary significantly. If you're at the upper end and they're at the lower end, that could explain how they apparently have more money for holidays than you.
Eg food and drink, both groceries and eating out, lunches, coffees etc. If you spend a lot here and they don't that could be thousands of pounds a year difference.
Also 'personal appearance'. Some people spend a lot on hair, nails, waxing, fake tan, botox and other enhancements, make up, creams, clothes, shoes and accessories, others spend very little. Again, could make a difference of £1k pa or more.
What do you spend on cars and commuting compared to them? Also broadband, phone, subscriptions etc.
For 'middle income' people, ie not those on the breadline and not people who can spend without thought, there could easily be a difference of £10k pa or more in spending without a noticeable difference in lifestyle to the casual observer, which will obviously pay for holidays, and that's without even thinking about variation in potentially bigger costs of housing and childcare.
As for reducing the cost, if your benchmark is 5 star AI in the school holidays, there's endless ways to have a nice holiday for less. You have to think about what is most important to you and concentrate on getting that.
For example, the weather and the beach/sea is exactly the same whether you stay in an apartment or 5 star resort. So if you self cater but eat out once a day plus stock up on drinks, snacks, ice creams and easy food from the supermarket, you can have a nicer experience than the cheaper AI hotels but for less than the price of the high end version.