I have been on dozens of web sites for hotels and cant find anything for 2 sharing in peak season for less than £650/700 each in a hotel that is like for like to 3 star brochure accom.
Is that for one week or two? And where? It makes a huge difference and to make like-for-like comparisons you really need to provide us with more info on what you've been looking for and then we can perhaps also provide more specific and/or detailed responses to your question. I can't imagine anywhere where a twin/double room in a 3* hotel for B&B for a week would cost more than £200 per room per night even during the school holidays. At the other extreme a fortnight's AI at £50 per head per night could be a deal that you'd find hard to beat anywhere in the height of the school holidays.
I go DIY mainly because our requirements are fairly specific and we don't like what is usually on offer via the mass market packages. We thus would have to use fairly specialised and/or smaller independent companies that put together custom packages. However, these days I can put together our own custom packages for far less for myself over the Internet. I reckon that our regular family trip to the Canaries costs us rougly 2/3rds of one from the few TOs that feature La Gomera. If we were in a position to book our flights well in advance with either Ryanair or Easyjet than I reckon that the saving would be close to 50%. If you too would like to go SC to La Gomera I can certainly let you have the links for a couple of very competitive letting agents for whom the main summer season of July and August is actually their off season and hence cheaper than the winter. Taking the same approach we've saved money on eg villa holidays in Portugal and city breaks. We usually travel as a group of adults but I can easily imagine that the savings for families with children are even greater because most hotels don't charge extra for kids sharing their parents room and in my experience it's only TOs that charge for under occupancy in SC apartments. The agent I use for La Gomera would charge us LESS if we didn't use both bedrooms in the 2 bedroom apartments I usually book!
I don't always go DIY, however. I could probably put together my own cheaper package to Cuba but so far I've always chosen to go with a small, specialist TO because I like their service both pre- and during the trip, know that I'll be with likeminded people, know that the accommodation has been very carefully vetted and the dance tuition is excellent. The extra cost is well worth it and the overall package represents good value for money which I couldn't better if I went DIY.
SM