I think the reason can be found in the keyword for this film: "monarchy." Zenda is based on a romantic tale by British pulp author Anthony Hope from 1894 (now mercifully forgotten), about an Englishman who visits a small Eastern European monarchy where he is asked to act as a double for the king.
They look exactly alike, as Rudolf Rassendyll (an understated Ronald Colman) can himself ascertain when he meets Rudolph V when on a fishing expedition. Intrigued, the prince invites him to his hunting lodge and then goes on to get stiff drunk (helped by some powder put in his wine). But the next day is his enthronement ceremony and if Rudolph V doesn't show up, the throne will be seized by his evil brother Black Micheal (Raymon Massey) and his henchman, Rupert of Hentzau (Douglas Fairbanks Jr). Rassendyll obliges and goes in for a day of pomp and circumstance, doing his best not to be exposed as impostor by the brother and other worthies. There is also Princess Flavia (Madeleine Carroll), in the past cold-shouldered by the real prince, but now of course the two fall in love, although that means they will be in for some heart-breaking. Other complications arise when the real king is kidnapped by Rupert and so we rush to the swashbuckling finale in an ancient castle...
The problem of the film is, that its ideology is solidly monarchistic. The various characters keep stressing the importance of king and crown for the well-being of a country (what about some democracy, Hollywood?). It presents monarchy as a fairy tale, although we today know better (in Robin Hood monarchy isn't questioned either, but that film is itself a fairy tale, while Zenda is almost contemporary). The film is full of pomp and circumstance such as the enthronement ceremony and a great ball. But we have seen enough royal marriage pomp on TV to be fed-up with it, let alone need a fake one. In 1938 in the real Europe Hitler was starting to stifle the independence of neighboring countries, but Hollywood dreamed on about thrones and kings and waltzes.
That doesn't mean there is nothing to enjoy in the film. The photography by James Wong Howe is atmospheric, the pacing is fast and the casting is perfect (David Niven and Aubrey Smith as loyal aides to Colman, to give two more names not mentioned yet). By far the best one is Douglas Fairbanks Jr who plays one of the most delicious and appealing villains from film history, bringing a much needed whiff of irony to the film.