Coaxial fiber lasers are studied via numerical simulations as an alternative to conventional cladding-pumped fiber lasers. The coaxial fiber consists of a Ho-doped core surrounded by a Tm-doped ring. When pumped at 805 nm, this fiber type resulted in a 54% power conversion efficiency, defined as the ratio of output signal power to total input pump power. The performance of this laser was numerically compared to conventional Tm/Ho doped fiber lasers under the same pump conditions. Simulations of a Tm:fiber laser pumping a Ho:fiber laser yielded a maximum 43% power conversion efficiency, while simulations of a Tm/Ho co-doped fiber laser yielded a maximum power conversion efficiency of 34%. These results demonstrate that the coaxial fiber laser has the potential for a significant efficiency improvement over conventional methods in addition to being a more compact system.