It wasn't too hard to see the change from traditional travel booking to web-based. But now, as the market becomes more and more saturated, the question shifts to which e-travel shop does it best. There have already been two big-winning Internet travel stocks, but the market continues to grow at a rapid clip, making room for recent public entrants to post substantial stock gains. If you missed the first wave of travel stocks, fear not -- there are still some brand-new stocks in the space. The thing is, are you still willing to pay up for growth, or do you need a margin of safety in a crowded market?

Travel madness
Recent years have been a nice ride for companies such as Expedia (EXPE -0.33%) and Priceline (BKNG -0.40%), which have both witnessed tremendous gains. Expedia was at a low of roughly $13 in 2009 before climbing back up to its current $54 price range. Priceline is completely out of control -- going from around $60 in 2009 to nearly $600 today. Priceline set itself apart from the competition with gimmicks where a customer names their own price for a hotel or air booking -- which is then shopped around by Priceline to various providers. The company has also had very successful marketing campaigns.

On a macro level, though, both companies saw such substantial gains because the market continued to grow at double-digit rates -- a phenomenon analysts think is not yet over. Priceline and Expedia should both show solid third-quarter results and long-term growth that continues to remain favorable, yet the major run-up over the past few years might suggest new investors to wait for a correction.

One recent IPO, and a very well-known name in web-based travel booking is Kayak Software (NASDAQ: KYAK). On the surface, Kayak looks more expensive than either Expedia or Priceline, and it's certainly not a steal at 30 times forward earnings. The company came out of the IPO gate in July moving fast, and is up 30% since then. Kayak's advantage is a rare one in the Internet world: It relies on advertising. With 50% of revenue coming from advertising, Kayak is actually in a better position than some of its competitors due to the sharp increases in Internet travel advertising expected over the coming years. The IDC predicts 15% compound annual growth for Internet travel ads for the next couple of years, according to a recent Forbes editorial. Such attractive growth bodes well for the company.

Worth the jump?
It would be a tough argument to say that Kayak, or any of the travel sites, will face growth difficulties in the near future. Though Google has entered the space lately, the major travel sites have cemented themselves as the go-to destination for bookings and will not easily be swayed by the search giant.

The thing is, though, for investors just getting into the space, they need to consider whether they want to pay the high valuations expecting quick growth. One trend in the industry is a bit troubling. Though ad revenue is essentially guaranteed to rise barring any major macroeconomic meltdown, users are not showing loyalty to any one site. I find that true with my own travel booking procedure. I check Kayak, Expedia, Orbitz, Travelocity, and even some no-name sites before making my decision. Without a gimmick like Priceline's Price Negotiator or Hotwire's star-based discount booking, the business looks more and more like a commodity. People won't ever really care which site they book through, as long as it's the lowest price for what they want.

My list of demands
I have no doubt the growth of web-travel sites will be substantial and rewarding to shareholders. It makes much more sense than using a traditional travel agent (and with the shift to mobile, even more so). The thing is, the space is crowded and we still seem to be paying up. Kayak is a strong company that will grow top and bottom lines with ease, but I am not quite ready to pay 30 times earnings for it (or any other travel site).

On the flip side, if macroeconomic conditions take a nosedive, leisure travel will go right with it and drag all of these players down a few notches. If and when that happens, be sure that I will jump in on the strong companies trading cheap.