Sue Ockwell, director of the Association of Independent Tour Operators, pointed out that those taking up the offer were compelled to buy travel insurance policies from Lunn Poly.
These policies were considerably dearer than comparable policies available elsewhere, she said, reducing the value of the discount.
Ms Ockwell explained: "The pounds 100 discount is per booking, not per person. But a family of two adults and two children under 11 taking one of the European holidays on offer with the discount would have to pay pounds 108 in insurance. They could get the same cover independently for pounds 50 or pounds 60."
Debbie Hindle, Lunn Poly's spokeswoman, said: "Our insurance is a condition of the pounds 100 discount. We don't claim to offer the cheapest insurance, but we do claim to have the very best cover. Any price comparisons must take account of that.
"We make it clear that the insurance must be taken out with us, and people will make their own decision whether it is worth it overall."
The Lunn Poly deal is part of a price war that has broken out in the package holiday market to combat the traditional dip in bookings between the Easter and peak summer holiday periods.
Thomas Cook is giving discounts of up to 40 per cent on selected holidays, while for one day yesterday Going Places, part of the quoted Airtours, cut pounds 100 off June holidays.
A spokesman for the Association of British Travel Agents blamed the price- cutting on a mistaken decision to launch this summer's brochures at the start of last August.
However Nigel Hicks, leisure analyst at the stockbroker Panmure Gordon, argued that the pounds 100m a week going into the National Lottery was having an impact on holiday decisions at the lower end of the market.
By contrast, specialist tour operators claimed that they were unaffected. Jo Clarkson, who runs Trips Worldwide in Bristol, said: "We don't discount any of our holidays. People looking for special-interest holidays are not buying on price."
A similar view was expressed by the upmarket Abercrombie and Kent, which runs safaris by Range Rover in Zimbabwe or Botswana at a cost of pounds 3,500 a head for 10 days.