A package holiday sometimes costs less than booking the identical flight and hotel separately. The difference comes from what suppliers will accept when their price is not visible.
Opaque pricing allows deeper discounts
A hotel that publishes a low rate teaches every future customer to expect it, and that expectation is difficult to reverse once it has been established.
Selling the same room inside a package hides the rate, because the customer sees only a combined total and cannot separate out what the accommodation cost.
This lets the hotel fill rooms at prices it would never publish, which is why the same property can appear cheaper in a package than on its own website.
Committed volume changes the terms
Tour operators contract blocks of rooms and seats well ahead, giving suppliers guaranteed occupancy in exchange for rates far below the published ones.
The operator takes on the risk of selling that inventory, and being paid for accepting risk is a large part of where the price advantage comes from.
Charter flying works the same way, with an operator filling an aircraft it has committed to and pricing seats against the cost of the whole flight.
What the operator adds beyond price
Packages sold in many jurisdictions carry protections that separate bookings do not, covering insolvency of the operator and assistance if arrangements fail.
Where a flight is cancelled, the operator is responsible for the whole arrangement rather than each supplier answering only for its own component.
The scope of these rules varies by country and by how the booking was made, and a combination assembled by the traveller may not qualify at all.
Where separate booking wins
Flexibility is the clearest advantage, since dates, durations, routings and hotels can be mixed freely rather than chosen from an operator's programme.
Loyalty schemes generally treat package bookings less favourably, and hotel status benefits are often not recognised on rates booked through an operator.
For unusual destinations, longer stays or trips built around specific requirements, the packaged product frequently does not exist in a suitable form.
How to compare the two honestly
The comparison only works when both sides include the same things, which means adding transfers, baggage, meals and any resort charges to the separate total.
Package prices are quoted per person while accommodation is quoted per room, so converting both to a single trip total is necessary before comparing.
Room category and board basis matter as well, because an operator's allocation is often the base room type rather than the one shown on the hotel's own pages.