Confidence in Priceline and Expedia, along with smaller peer Orbitz Worldwide (OWW), has solidified in recent weeks following strong second-quarter reports for the companies. Each of the names reported better-than-expected earnings results.

Expedia and Orbitz have been helped by the decision to cut booking fees for airline tickets and reduce fees for hotels. The airline fees had averaged about $5 per transaction.

The move makes the OTAs more competitive, but at what cost? "That was pure profit for the online travel agencies," says Standard & Poor's Equity Research analyst Scott Kessler. "Five dollars with no cost is a pretty nice margin."

Get the full story at Barron's (free content)