Many years ago I used to work in customer relations for a very large tour operator in LA, Club Universe. We had thousands of tours world wide. My job was to read the bitch letters and respond. Costs vary greatly from economy to QE2 Around the World. It is cost effective only if you have a good time, and choose the right tour cost for the quality of what you desire. Many of the complaints were about hotels and not being whatever amount of stars the brochure said they were. People usually choose a tour because they like to be lead, and don't want to have to think or have any adventure.
As always YMWV (Your Milage Will Vary):
Advantages (not that I think many of these are advantages to me):
Not many decisions to make, you are told where to be and when; picked up and dropped off at your hotel; restaurants are usually picked for you; you are told what you will see and visit prior to the trip; they choose the class of hotels (usually by cost) prior to leaving; transportation is furnished; you know the basic cost prior to leaving.
Disadvantages (which far out weight the advantages IMHO):
you are told where to be and when; you are on the time schedule of others; very little outside of the structured activities you can choose; no chance to stay longer at a location if you love it; restaurants are chosen for you (usually by how much the guide gets in kick backs, not by quality); you have to stay at the hotel even if the brochure lied and it is a dump; very little time to yourself outside of structured activities; long days of bus rides; traveling with blue hairs (which I may be now 59) at their pace; having to listen to couples pissing and moaning at each other for hours on end, while you are seated right behind them; being in very close proximity, all day, to people that you would never spend time with anywhere else for even a minute; with transportation furnished delays are inevitable (charters, buses, etc.); being taken to one rip-off place after another because the guide gets a KB; very little chance of refund for what is perceived as poor quality or services.
Basically, if you enjoy being taken care of and structure, the right tour may not be a bad idea. If your idea of fun is to wing it, no chance on the guided tour.
My idea of taking an organized tour is much like I feel about wearing a plaid sports coat. If you ever see me doing either, just shoot me right there.
Health & happiness
Santas Bro