To gain footholds in the $40 billion online travel industry, Orbitz and Travelocity built up significant market presences using virtually identical business models. In targeting Internet-savvy consumers, both companies provided discounted prices and packaged travel in an almost identical format. Recently, however, increased competition has begun to force changes.

Direct sellers, such as AMR Corp.'s American Airlines and Marriott International Inc., can offer similarly low prices along with such benefits as frequent-flier miles and hotel points, while metasearch engines, which search for travel services but don't allow you to book directly, can guarantee the cheapest option for consumers. Also, to earn those precious travel dollars, Orbitz and Travelocity are going to have to differentiate themselves in ways that grab consumers' attention.

"What we're seeing is the U.S. online travel market maturing with consumers wondering where they find value," said CIBC analyst Paul Keung.

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