WASHINGTON (REUTERS) - Prices of airplane tickets in the US are on track to fall in 2017, says a new American Express report on the travel industry.

That's because legacy airlines are competing for passengers with budget carriers, and need to fill seats.

Short-haul economy fares could drop as much as 3 per cent, and long-haul business class could get 1.5 per cent lower, according to the American Express Global Business Travel report. As oil prices have fallen, airlines have been able to expand the number of flights to places that were previously unprofitable.

To make up for the lost revenue, airlines will be trying to make money in other areas, says Jonathan Root of Moody's Investors Service.

"They are going to continue to push ancillaries and fees, and they are going to be very diligent on their cost base outside of labor and fuel. So, improving their practices and efficiencies across the operation at the airport, in the maintenance operation particularly, even on the distribution side," said Mr Root.

But once travelers get to their destination, the celebration will be a bit muted. US hotel rates are estimated to increase 3.6 per cent next year.