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Europe with 2 children and an infant

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We are from Mumbai, India. A family of 5 (myself 42, wife 35, 2 children of 11 and 12 and one year old infant!) planning a Europe trip. We are flying into London on 12th April (after a 4-day stopover in Dubai) and return from Zurich on 2nd June (all by Emirates). I have my brother in UK and another close relative in Zurich. So, the itinerary for both these countries are taken care by them. I have to plan the itinerary for other countries in Europe and looking for suggestions, ideas, tips on it especially taking into consideration the family.
We will be in UK from April 12 to 30 and plans to reach Switzerland by 20th May. The European itinerary need to be finalized for travel from 1-May till 19th May for the in-between countries. I understand that the coach travel (4 country bus package tour types) will be tough and tiring for the children and infant and many of these package tours I checked do not allow children below 12. Price-wise, such tours were looking more attractive.
We want to plan a value-for-money 18-day itinerary which is at a leisurely pace. As we are first time travellers to Europe, our interests will be the typical European attractions rather than anything out of the box. As of now, thinking of France, Spain & Italy.
When I search on hotels with 2 adults and 2 children, generally it picks up "not-so-value-for-money" propositions. Are there accommodation options where the pricing is not on a per person basis? Do we have options like we book a one bedroom apartment and we can all manage with that with a pricing which is not worked out per person? Are hostels really the cheapest option? When I searched for some with our full family details, it also ends up becoming expensive as the rates are per person which when multiplied for something like 4-5 nights is not so "low cost"! Sorry, if I am sounding too unrealistic :-}

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