A cloud-hosted VPS is better than a VPS on a physical server because it has the benefits of being hosted on the cloud. These benefits include a greater ability to handle traffic variance, greater cost effectiveness, and resistance to downtime.
Because cloud servers can expand and contract as needed, they can handle large spikes in traffic without service interruption. This expandability also means you will only pay for the capacity you use, rather than a flat monthly rate regardless of traffic.
Finally, cloud servers can seamlessly move their content from one physical server to another. That means if any physical server goes down, the cloud server can simply switch physical servers with minimal interruption.