Destination Bethlehem: investors wanted to help transform the Palestinian city into a tourism hot spot
It’s a hot July day in Bethlehem, and white-robed pilgrims from Nigeria stand in the courtyard entrance to the ancient church, singing and beating drums. They’ve travelled more than 3,500 kilometres to enter the church’s low wooden door, pass through a nave under restoration and down one of the staircases in the sprawling church, to the grotto. There, they will kneel in prayer and devotion at the place where Christians believe Christ came into the world.
From across the courtyard and car park, mayor Vera Baboun can hear their hymns. Two million people a year visit the Church of the Nativity. Baboun would like to turn many more of them into friends of Bethlehem. “Right now, they drive in, they drive out,” she says. “They spend next to nothing.”
A ferocious widowed mother of five, beloved by local shopkeepers, Baboun is in charge of one of Palestine’s most important assets: the city of Bethlehem, which lies behind the wall that separates parts of the West Bank from Israel and Jerusalem. She has overseen the development of 11 new hotels and a conference centre, and has obtained hard-fought-for permission from the Israelis to improve the road leading into the town of 25,000. Palestine is home to some of the most important heritage sites in the world, from Jericho to the Dead Sea, to the Al Aqsa Mosque in East Jerusalem – the third holiest site in Islam. Despite the gruelling conflict of the past decade, the number of tourists to Jerusalem, from where many visitors to Palestine start their journeys, is up by a third since 2001, to 3.5 million.
Now, a handful of investors hope to turn that appeal into growth, with plans to build two luxury hotels in East Jerusalem and the formation of a holding company under the backing of the Palestinian Investment Fund. A marketing and events campaign for Bethlehem will also start next year in hopes of persuading the tourists who do come to stay longer, or overnight.
“Palestine needs a string of pearls, a series of perhaps small, well-developed nuclei of tourist centres that can be photographed and presented as the real Palestine,” says Garrick Aird, senior partner in London for Middle East-based Von Dekermann Global Management Consultancy, which has developed tourism destinations around the world, including Dubai and the Near East. He estimates a major expansion of the tourism sector would cost US$1-2 billion (Dh3.67-7.35 bn) for site development and infrastructure, plus $50 million a year for marketing and communications.
Little has been done to develop a tourism industry in Palestine, despite its 2m visitors a year. Spending on tourism marketing is about $500,000, compared with $10m in Jordan and $40m in Israel, according to the Initiative for the Palestinian Economy, a framework for economic growth established by the Office of the Quartet.
“Tourism today is about stories; we have a story,” says Khalid Husseini, whose family is developing a five-star hotel in East Jerusalem in the former headquarters of the Palestine Liberation Organization. Like others hoping to increase tourism, he hopes to attract investors from the Palestinian diaspora who could cope with risk in the interest of helping their homeland.
One of the ideas that underpins efforts to bring more people to Palestine is the sense that when people see it with their own eyes, they will understand more about the conflict.
Ayelet Waldman, an Israeli-American lawyer and novelist, came to Israel as a teenager on one of the free Birthright tours available to young Jewish people to learn about the history of Judaism and Israel. In 2014, while there for a literary festival, she visited Hebron with a Palestinian peace activist.
“I had no idea. When I saw Hebron for the first time, speaking as an American lawyer, I could not believe what I saw. I knew the truth of the occupation. Until you walk down a street on which only Jews and foreigners are permitted to tread in the middle of a Palestinian city, you don’t understand.”
Working with an organization called Breaking the Silence, which offers political tours to Hebron, she and her husband, American novelist Michael Chabon, recruited writers around the world to submit essays about the occupation for an anthology, Kingdom of Olives And Ash, which will be published by HarperCollins in May. Colm Tóibín, Dave Eggers, Raja Shehadeh and Mario Vargas Llosa are among those who stayed in East Jerusalem and the West Bank before writing their responses.
There are huge obstacles to tourism growth in Palestine, beginning with the periodic violence. The occupation costs both Israel and Palestine in tourism dollars: if there was 10 years of peace, it is estimated that tourism could add $760m to Palestine’s GDP and $1.1bn to Israel’s GDP, according to a 2013 study by the not-for-profit United States think tank Rand Corporation.
When violence does flare, the number of visitors naturally falls. Business owners say visitor numbers dropped by a quarter after the 2014 Gaza-Israel conflict, in which more than 2,200 Gazans and 70 Israelis died. The InterContinental Hotels Group withdrew its contract with the famous Jacir Palace Hotel in Bethlehem after a series of stabbings in Israel and reprisals in the West Bank.
Then there are the restrictions on movement due to the occupation. Transit in and out of Israel and via checkpoints into Palestine can take hours. Entry is not guaranteed and it’s generally more difficult for people from Arab countries.
It’s not only tourism numbers that decline in inverse correlation with increasing violence. Foreign investment, which is crucial for development, flows mainly from the Palestinian disapora, and its fluctuations can be plotted against hopes for peace; it peaked two years after the 2007 Annapolis peace conference and Paris donors’ conference and has fallen dramatically with the recent failure of US secretary of state John Kerry’s talks.
Future returns on investment can be described as uncertain at best. CCC, an international construction company founded in the Middle East, has poured about $200m into Palestine, including a partnership in the Bethlehem Convention Palace, which has a 2,000-seat auditorium. It has not yet realised a profit because there are not enough bus companies to willing to transport conference attendees from Jerusalem, says Samer Khoury, CCC executive vice-president.
His company also part-owns the only power plant in Gaza. Damaged during the most recent conflict, CCC is waiting on permits to carry out an upgrade, but because banks are unwilling to fund the project without a guaranteed return, the company will have to assume the financial burden. The reason for the banks’ reluctance is all too familiar: the wars in Gaza have prevented the power plant from being able to sell its power at a profit.
However, Khoury, like many in the Palestinian diaspora, is not prepared to give up hope. His family has helped to finance the new Bethlehem Museum and endowed the Bethlehem Development Foundation. “We are there for 2,000 years and will be there for 2,000 more,” he says. “Our assumption is, if you create economic development, people move from radicalisation. They get busy. They don’t pick up guns.”
In addition to the ongoing threat of violence, Palestine has all the problems inherent to an emerging market. Critically, for tourism investment, it’s hard to get an accurate picture of occupancy and room rates, says Aird, who believes an audit of the hotel industry in East Jerusalem and the West Bank should be a priority.
A legal framework to support more complex international ventures and partnerships is also needed to encourage investment, such as fair investment protections via ring-fenced funds, as well as good governance measures.
Funding agency investment support is also helpful. This is already present in some projects in Palestine, in the form of guarantees from the World Bank’s International Finance Corporation (IFC) and the US government’s Overseas Private Investment Corporation (OPIC).
If the conflict between Israel and Palestine appears unending, the world around the conflict is changing. Many tourists to the Holy Land are Christian and mostly from Europe and the US. If it were easier for tourists from the Arab world to come, says Mohammad Mustafa, chairman of the Palestine Investment Fund (PIF), the numbers could increase by millions. PIF is the $800m de-facto sovereign wealth fund.
“When Palestine is able to control its borders, tourism could be the most important contributor to the economy in terms of income for the country and also jobs for the people,” says Mustafa.
But there is another source of growth. Greater prosperity in Asia and Africa means that Christian and Muslim pilgrims are travelling in ever-greater numbers. In Jerusalem, Filipino pilgrims line up outside the tomb of Christ, wearing red T-shirts that say: “Jerusalem 2016”.
Alaa Afifi, whose family owns an 1,800-employee travel and transportation company in Nazareth, Israel, markets to Europe, the US – and now, China. It’s hard to get an accurate picture of the number of Chinese Christians, he says, because the religion is mostly underground. But tourism numbers from Africa and Asia were up, year-on-year, in the first half of 2016, he says.
Paradoxically, the spread of terrorism around the globe is reaping another kind of dividend: many people and places are now experiencing the same kind of violence that Israelis and Palestinians have long lived with. Danger elsewhere creates a shared experience and more of a level playing field for the Holy Land.
“Nowhere in the world is perfectly safe, and we are safer than many places,” says Afifi. He is one of up to 1.8m Arab Israelis in Israel.
In 2000, Nazareth and Bethlehem hosted competing campaigns to welcome the new millennium. Back then Bethlehem’s marketers found many doors closed because they were Palestinian; Nazareth, on the other hand, emerged as a robust tourist attraction.
Cited by The New York Times as a restaurant destination, the city that lies within Israel draws about one million tourists a year, according to the Initiative for the Palestinian Economy. Fewer people visit Nazareth than Bethlehem, but the city gets more of an economic boost from them.
In the centre of Nazareth, Afifi’s office rings daily with the peeling of bells from the Church of the Annunciation at midday and 6pm. Sometimes the sound mingles with the call to prayer. At other times he hears the sound of military jets from the nearby Israeli base.
In the tourism business, he says, boundaries melt away. Globally, tourism is enjoying growth. Today, Palestine may find more doors open. “If people in the tourism business were running things,” says Alfifi, “we would be making more progress. Instead of running around in a circle, we would be trying a new path.”
Improved marketing could also help Palestine. Nassim Nour, executive director of Sharakat, a new PIF fund for investing in small businesses, also wants to prolong tourists’ length of stay and to draw pilgrims more broadly to Palestine’s historic and cultural attractions. Sharakat aims to invest $200,000 to $3m in small businesses, taking a stake of up to 40 per cent in equity.
The fund has a total $50m, with $36m yet to be invested.Palestine can draw on a number of specialist tourism markets. First, there is faith for both Muslims and Christians, then there is antiquity and culture, from Roman ruins and Crusader cathedrals to folk traditions of dance and embroidery. With more strategic marketing, more Arab Israelis and expats from Jordan might make the short trip to Bethlehem or to Jericho.
Then there is modern Palestine, the land of bulldozers, Intifada and the occupation. Ironically, the 8-metre-tall, graffiti-covered wall, famously decorated by the UK artist Banksy, which is now more than 10 years old, is probably Bethlehem’s second most-photographed landmark. It’s where Pope Francis called the political situation “increasingly unacceptable” when he stopped to touch the wall and offer prayers in the city in 2014.
Tourists from Israel and beyond visit on trips organized by groups such as Breaking the Silence. It remains illegal for Israelis, though not Arab Israelis, to visit the West Bank. In Hebron, the children of urban Jewish settlers gather in groups at the end of vacant streets, once the scene of a thriving Arab market, and spit at the former Israeli military man who leads the Breaking the Silence tour group along the boarded-up houses and storefronts, talking about the toll serving in the military takes on young Israelis.
“Don’t worry,” he tells those listening. “It’s only me they target.”
And there are other “solidarity tourism” operators, as they are known, working locally, such as the Bethlehem-based Alternative Tourism Group of Palestine and Breaking Bread Journeys, run by two women, a Palestinian and an Israeli.
The most ambitious attempt to build on Palestine’s modern history is the plan to renovate the Orient House into a 220-room five-star hotel. Built by Ismail Musa Al Husseini in 1897, the distinctive classical mansion in East Jerusalem hosted Kaiser Wilhelm II, the first European king to visit Jerusalem since the Crusades. Parties were thrown for the glitterati of Jerusalem, and in the way of the city, business and politics were conducted through hospitality.
“It was a place to discuss and make decisions about the dramatic changes underway in the Ottoman Empire,” says descendant Khalid Husseini.
In the 1990s, the PLO used the building as its headquarters, receiving guests such as US secretary of state James Baker to the civil rights’ activist and Democratic presidential nominee Jesse Jackson. When the Second Intifada broke out in 2000, the Israeli government closed the building.
It has since been developed into offices, sitting behind a car park dotted with white United Nations vehicles. Husseini’s family would like to see it restored to its former glory and has procured an agreement to brand it as part of the Marriott hotel group’s Autograf collection. Building permits are in place, and OPIC has made a $35m commitment for a low-interest loan to finance the project, Husseini says. A PricewaterhouseCoopers feasibility study predicted that the 220-room hotel would have an occupancy rate of 75 to 80 per cent, charging $220 per night.
Orient House is one of two high-end hotels planned for East Jerusalem. The PIF is planning a $50m, 200-room project with outside investors, says chairman Mustafa.
One of the most compelling arguments for investing in flagship projects and infrastructure in Palestine, as elswehere, is the promise of trickle-down economic growth. A major investment plan could produce up to 30,000 jobs in three years, the Initiative for the Palestinian Economy concluded in 2014.
Just 100 more tourists a day walking by Bassem Giacaman’s shop in Bethlehem would make a difference. He sells olive wood nativity sets and souvenirs, carrying pieces designed to appeal to Muslims, Christians and Jews, including Banksy T-shirts. He brings in about $100,000 a year, enough to employ three people and earn him a small profit, he says, of about $10,000.
To Giacaman, Bethlehem is a place of peace not conflict. Time and effort are different in the Holy Land, he says: “Changing people’s minds is like trying to pull out a 2,000-year-old olive tree by the roots. Eventually, if you keep pulling and digging, it comes.”
Elizabeth MacBride is an independent journalist who writes for CNBC, Quartz and Forbes Magazine, and many others. She is currently working on a book about the economic rise of women, Pink Boots In Cairo. In 2016, MacBride spent six months as a writing fellow at the Office of the Quartet researching and reporting on Palestine’s economy.
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