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Is the book Holes by louis sacher of high literary merit?

The book is definitely an interesting read, it appeals to students because the story is so engaging.  I do think that it has literary merit, there are valuable lessons in the story.

Like a good folk tale or legend, the story keeps the two story lines closely linked and provides an interesting path to discovering how the two settings come together. Like an entertaining fairytale, it has a happy ending. 

"The first of these is the emotional reality of the book—its institutional setting, the sense of injustice, the importance of peers, and so on."

"This dramatic intensity is balanced by the final element critics single out for attention in Sacher’s work: its sense of humor. From the boys’ nicknames to the jokes that they and the Yelnats family tell throughout the novel, humor is praised as a welcome and effective relief."

There are many things in this book that give it value to teachers, but I doubt it will ever make the "classics" list.  It's a great read, it deals with issues relevant to youth today, and it's always fun to see the bad guy get his poetic justice.