Worth about £10bn, the annual UK package holiday business is big. So when even a few percentage points of that market start slipping away from the established Big Four tour operators - Thomas Cook, First Choice, Airtours and Thomson Travel - they sit up, take notice and, in this case, switch on their TV sets. From a standing start three years ago, TV Travel Shop has created a £48m-business and brand that this year will capture £200m in travel package revenue and, it says, send 400,000 people on holiday.

"We're not a tour operator, but if you measured us as one, we would be the fifth-largest in the country," says TV Travel Shop chief executive officer Stephen Welton.

All of which explains why Thomas Cook has decided to try to beat TV Travel Shop at its own game, and will today launch Thomas Cook TV on Sky Digital. "Do we think TV Travel Shop is great quality TV? No. But boy, is it shifting product," says Katherine Gershon, head of Thomas Cook TV. So how do they compare? The computer-generated sets of Thomas Cook TV - a 24-hour mix of footage of resorts, themed strands on topics such as beaches and clubs, and studio-based discussion - looks smarter than the plastic potted palms, in-your-face sales tactics and GMTV-like feel of TV Travel Shop.

"We think Thomas Cook TV will be more enjoyable to watch and book and I think that's a big difference," says Alan Stewart, chief executive officer of Thomas Cook. Weldon retorts: "We're not trying to win (TV) awards; we're trying to sell holidays to a mass market." But the most telling difference lies in the production costs. To minimise the risk in moving into TV, Thomas Cook has hired interactive TV company Enteraction to create and run the new TV channel, a move akin to the contract publishing deals that brand owners are increasingly striking with magazine companies.

Thomas Cook has spent about £3m on the launch, including recruiting 45 staff, equipment, shooting more than 600 hours of video, creating a news-room-style digital content management system, and securing carriage on Sky. Even if operating costs double this figure - and Enteraction says they won't - this is a small outlay compared with other branded channels.

To date, TV Travel Shop has spent £50m launching and running its three channels, two in the UK and one in Germany. Boots and Granada spent a reported £30m on their ill-fated Wellbeing health channel. Digital economics have changed the game. Just three years older, TV Travel Shop has been relatively more expensive not only because it has used more traditional (and more pricey) TV production systems, but because it has had to build an entire back office, including call centres - something that Thomas Cook already had in place. Welton calls TV Travel Shop the Carphone Warehouse model - a one-stop channel where all package travel companies' wares are on display.

"We sell 35 different tour packages on a daily basis," he says. In fact, TV Travel Shop's second channel - the imaginatively-named TV Travel Shop 2 - has dedicated blocks of programming for specific tour operators' packages, including an eight-hour daily block for JMC tours, a unit of Thomas Cook, an arrangement which will continue.

What is slightly odd about both operators is that neither as yet allows viewers to book a holiday through the TV set. The channels are video advertisements, interspersed with some pretty hard-sell pricing information - all meant to whet the appetite and answer basic questions about places and prices so that viewers will call a phone centre, log on to the website, or, in the case of Thomas Cook, go into one of its 700 high street shops and book a holiday.

Thomas Cook TV is part of the company's overall marketing spend, although Thomas Cook says it will keep track of what influenced a customer to buy (Watching TV? A brochure? A sign in a high street store?) on its computer management system. "The challenge as the business mix changes is to ensure we have the optimal allocation across all sales channels," says Thomas Cook's Stewart. What Stewart means is that electronic sales channels for travel are growing. Investment bank Morgan Stanley says that by 2010, TV will account for 17 per cent of travel-related sales.

Current interactive TV technology is slow and clunky, as anyone who has tried to buy anything from Sky Active will attest, and adding interactive features increases cost. There is also the trust factor: are people willing to book a big ticket item like a £700 to £1,000 holiday over their TV sets? The wide use of Teletext to book travel in the UK - today Teletext accounts for 15 per cent of all travel packages sold - bodes well and is one reason why both TV Travel Shop and Thomas Cook have plans to allow viewers to get more detailed information about a holiday by clicking a button on their TV remote control, starting next year. "What we want is to eliminate the need to have a lot of brochures," says Welton.

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