When you buy a package deal from a travel site, most likely the people selling the package are travel consolidators. These are individuals who purchase a large number of tickets in bulk and then sell them for lower prices to the consumers. Because they buy airline tickets in such large quantity, they are able to secure substantial discounts. Consequently, they are then able to resell them to you for a savings in your wallet as well.
Through their negotiations with airlines and hotels, travel consolidators purchase a sufficient number of tickets that they have specific contracts because of their consistent purchases every month or week.
Airlines in particular seek such consolidators and hire them, usually to focus on a particular region or destination due to consumer interest in that part of the world. For example, most airlines have consolidators for larger and more populated cities, such as Las Vegas and Orlando. They usually select flights that are not likely to sell out and push those to their own customer base.
While consolidators are able to sell these tickets at lower prices, both they and the airlines still are able to make a profit. And since the end purchaser in the cycle receives inexpensive rates, it is a win-win scenario for all involved. Consolidators usually cater to a specific market, which can be students or even travel agents who then can resell the tickets as well. Some work strictly online for the best deals.
The only real negative in purchasing an airline ticket or hotel room from a consolidator is that you must buy your ticket based on flight times they have available. Customers therefore have a narrow range of options concerning flight times and available hotel rooms, and you are subject to their terms. However, if you are pretty flexible about when you fly and where you stay, you are certainly going to get a better deal in terms of how much you actually pay in the end. So that is the trade off.
Package deals are typically sold through consolidators, so it would not be unusual to spend your time flying and staying near other people buying the same fundamental deal.
All in all, it is a bargain to buy through a consolidator if you are willing to overlook the fact that you must fly their specific routes and stay within the limitation of their available hotels. But since the financial savings can be fairly substantial, cost-conscious vacationers are frequently willing to bite the bullet to save their money for other options.