Noone ever says Nu metal, or pop punk ended hair metal, it's always Gunge that gets blamed.
Diminishing returns were affecting the hair metal scene from after the mid 80s. Few hair metal bands (or those who got lumped into the scene) who released their first album after 1987, had a more successful album. Extreme are the only exception I can think of.
I never 'got' Gunge, it just seemed like a lack of effort both visually and musically. The most interesting bands to me, like Pantera and Alice in Chains, had been part of the hair metal scene before.