Heavy discounting on holiday prices in the peak sales period is forcing travel agents to look beyond mainstream operators for business following a sluggish start to the year.

Sources say operators Thomson and First Choice are tactically discounting online by up to 18%, while “rampant competition” in the cruise sector is seeing discounts of up to 15% from some retailers.

Package sales for the big four are said to be 17% down year on year, with one thought to be selling more than 85% of product inhouse.

Plymouth-based Peter Goord Travel owner Anthony Goord said online discounting by major operators was undercutting prices by as much as £500. “Operators are giving away  more than our net cost. We’re having to move more upmarket, even though we want the volume sales. There’s no question the bucket-and-spade market is suffering,” he said.

Thomson commercial director Derek Jones denied discounts were any different to 2006 but said: “It’s clear some of our competitors on the web are discounting very aggressively and we will go so far to compete.”

First Choice retail managing director Cheryl Powell said: “There are online discounts, but nowhere near 18%.”

She said passenger numbers were “well up” so far, while Thomas Cook director of commercial relations Marc Bennett added: “We are comfortable with the position we are in.”

Meanwhile, Carnival UK managing director David Dingle said competition was “rampant” between agents.

“I’m amazed by how much commission agents are prepared to give away,” he said.

However, Ocean World Travel owner Michelle Dance said agents were discounting because there were so few new deals from operators.

Cadogan Holidays managing director Tom Allen said the operator had its best day on Monday January 22, officially the year’s most depressing day, while Norwegian Cruise Line general manager Francis Riley said sales were up 20% each day from January 22.