There are no hard rules as to how a holiday is priced, tour operators can use their own discretion as to whether they charge for extras - ie meals, transfers, under occupancy supplements. At certain times of the year ( low season etc) they may scrap the charges ( or "hide" them in the basic cost) to encourage people to book. Some Tour ops charge the under occupancy supplements, some dont- its not a law to charge them, the only real rule/law is that the Fuel Supplements are shown in the costing of the holiday.
So basically- you may travel with one tour operator as a party of two and be charged an under occupancy supplement, whereas another tour op, to encourage bookings may not charge. Tour operators are always battling with each other to get customers and always offer gimmicks etc to get you to book with them.
If you are looking for "free child" places without having to pay under occupancy supplements then you need to be booking your holiday the summer before you wish to travel (this weekend there will be another push with new brochure editions out for next year)- you cant really expect to get free child places if you are looking for a holiday which is going in two weeks time.
In answer to the original posters question- this is how Allocation on Arrival works-
- each tour operator has a stock of what is known as "guaranteed units" basically this means that they have a contract on a holiday property and have payed the hotel/apartment owner in advance, so if the rooms here go empty, then the tour operator is, in effect losing money- so these rooms are offered as Allocation on Arrival holidays.
Guaranteed units are generally very good properties, most tour operators battle it out every year to get contracts on certain properties.
All other units ( non guaranteed) are payed for by tour ops on an "ad hoc" basis ie if they need a room, the tour op is invoiced after the client has left. These are the types of properties that tour ops dont really like to have to use for allocation on arrival as the price tends to increase from a basic room rate to the tour operator.
Most guaranteed units are the ones with Tour operators own kids club ( not hotel run kids club) and also in the brochure they will be advertised as "exclusive" to the tour op- these are generally the types of properties used for allocation on arrival.
If you book a 3 self catering allocation on arrival then by law- that is what you have to have from the tour operator- if there are no 3 sc available on the day that you travel out to resort, then you have to be upgraded to a 4*- you cannot be downgraded, this is stipulated by ABTA.
a few years ago while working in mallorca, some people had booked 2 sc AOA- there wasnt any available on the island - the only accom available was a 5 hotel so thats where the clients went!! - so its not always a nightmare!
If you are going to do an AOA with children, then choose a destination which is generally good for families ie menorca- portugal-fuerteventura-smaller greek islands. That way you can be sure that you wont end up above a nightclub!!
this has turned into a travel essay, my fingers now ache and need a holiday!!