I've always had some sort of troubles on deciding which one is my favourite. They're not like the other pair of legendaries, which I can pick one easily and without a second thought.
I like both designs and maybe what it could disappoint me a bit it's the type combination of Lugia, but it's actually no problem, I still like it.
Since I always like to answer what it's asked in threads like this, I will go with Ho-oh for one only reason: maybe the storyline fits a lot more with Ho-oh rather than with Lugia. It seems like they made Ho-oh first and thought everything about what its storyline could be, and then came Lugia and they made something up very quickly - because I don't know what you think but, it's really weird to see the Kimono girls in the deepest of an island summoning a monster of the sea (at least it sounds weirder than the Kimono girls in the top of a tower summoning a bird of the sky.)