George Giacaman owns the Holy Land Arts Museum, a shop that sells hand-carved olive-wood sculptures. His shop is in a prime location, right outside the Church of the Nativity, a pilgrimage spot for hundreds if not thousands of Christians every day, yet in the mid-afternoon his store is deserted. Standing in the doorway, Giacaman points up Milky Grotto Street, which runs adjacent to the church. Souvenir shops abound, yet of the dozen or so stores only four are not boarded up. "Many of these shops have had to close down because no customers came," says Giacaman. He then points to a large restaurant on the other side of his shop where a group of tourists are waiting. "This restaurant pays the guides and drivers of tour companies commissions to make sure that people eat there," he says. Bethlehem's tourism industry took a serious hit with the outbreak of the intifada and it reached a nadir in 2002 when the Church of the Nativity was used as a safe house by terrorists. Now tourists are starting to come back. Even in November, traditionally a weak tourism season, the bus station is full of coaches and a constant flow of people from as far as India meander through the churches around Manger Square. The Palestinian Authority's Tourism Ministry has projected 800,000 visitors to Bethlehem in 2008, as compared to 400,000 in 2006 and 150,000 in 2003. Meanwhile, it has allocated money for cleaning and decorating the city in anticipation of the annual Christmas parade. In addition, last month Quartet envoy Tony Blair announced that he was developing an initiative to be implemented with the ministry to further develop tourism in the area. Dr. Samir Hazboun, director of Bethlehem's Chamber of Commerce, says that the upswing in tourism is always dependent on the political situation and therefore vulnerable to another downturn. Still, he lists some encouraging statistics for the past year. Occupancy of the town's 28 hotels is averaging 50 percent, up from 25% in 2003. Also, in the past month three new souvenir shops have opened, while none has closed. Unemployment has dropped from 38% four years ago to 25%, and Hazboun predicts that increased tourism could bring this figure down further to 15%. "If we give tourists a special checkpoint it will make things easier for them and the tourism will be of mutual benefit to both sides [the PA and Israel]," he says. Some Bethlehem residents have accused Israel of discouraging tourists from entering the city, but Rafi Ben-Hur, senior deputy director-general of the Israeli Tourism Ministry, insists this is not true. "While the situation is safe we are actively encouraging Christian tourists, through travel agents, to go and visit the town. We see Christians as a bridge for peace between our two communities," he says. The ministry has also recently opened a tourism office at Rachel's Crossing, near Rachel's Tomb, the aim of which is to quicken the passage of tour coaches through the checkpoint by exempting them from searches. It has even introduced a policy of handing out candy to Christian pilgrims. To encourage internal tourism, Ben-Hur says that a free shuttle bus will be offered over the Christmas period to help Christian Israelis reach Rachel's Crossing. BETHLEHEM IS integral to the PA's economy, making up roughly 20% of its GDP. After the textile and marble industries, tourism is the third major component of the town's economy. However, even with recent improvements and Blair's planned tourism initiative, locals who depend on tourism for their livelihood are far from optimistic. During the last push to invest in tourism in the '90s, many businessmen were encouraged to take out large loans to open new hotels. But after the intifada broke out in 2000, they were unable to keep up with their payments. In response, the PA Tourism Ministry has appealed to Europe and the World Bank for aid in relieving this debt. Siam Khouri, the proprietor of the Bethlehem Inn, a mid-market hotel on the outskirts of town, knows firsthand the financial damage that the conflict with Israel poses to local businesses. After the IDF temporarily took over his hotel during the intifada, Khouri found himself with a new problem: The graffiti-covered security fence runs just meters from his hotel. "First of all the guests get no view," he says. "And some people are afraid when they see the wall at night - it gives them the feeling that they are in prison." But Khouri claims that the problems that plague the town are not symptomatic of the conflict alone. Administration of the PA Tourism Ministry constantly changes hands, he says, and there is no long-term plan to develop the town into a more attractive tourist destination. As a result, even now, when business is the best it has been in seven years, guests are reluctant to stay for more than four or five nights because of scarce recreation options, he says. "There is no cinema. There is a disco, but it only opens two nights a week," he says. "This is a Christian town; it is possible to have alcohol sold more freely here." Not only is there a lack of entertainment, but the road connecting the town to Jericho and Ramallah is narrow and poorly maintained, while the road to Herodion is barely wide enough for one car and in many places has collapsed into the aligning ditches. Half-built buildings litter the town and even after the pre-Christmas clean-up, rubbish can be found strewn across the pavements with almost no bins in sight. But it is clear that with sound investment the town could become one of the highlights of a future Palestinian state. The surrounding landscape is spectacular. A trip 20 minutes to the south takes one into the stark beauty of the Judean Desert, where the Mar Saba Monastery lies concealed in its folds. And the town itself has a charming old quarter with an authentic market. ANOTHER REGULAR complaint is that increased tourism is useless if it does not benefit small businesses. Giacaman says that four or five major gift shops and as many restaurants are willing to pay commissions of up to 35 percent on sales to the guides of tour companies to ensure that they have a virtual monopoly on business. Going back into his shop, Giacaman takes out a letter he is drafting to the PA Tourism Ministry asking them to intervene. This is the last in a line of several such efforts, but he says nothing has been done so far. Tourists choose to travel with tour companies rather than wander the town individually for several reasons. The pilgrims often travel in groups along with a pastor, so that they can pray together. And the town is still commonly perceived to be unsafe and tour companies claim to provide people with protection. That tourists can easily feel intimidated is understandable. Outside Giacaman's shop, in full view of tourists, a commotion breaks out as armed Fatah security men, some masked, others beating the sides of their jeeps with batons, try to push their way through traffic. But Giacaman says that the tour companies take advantage of people's fears by strictly controlling where they can and cannot go, including where they can eat and shop, thus depriving small businesses like his of a fair share of the profit. Taxi drivers have also been feeling the pinch. At Rachel's Crossing, drivers anxiously wait to take visitors down into the city. When a foreign face approaches from the turnstile, a throng of five or six drivers gather round, angling for a deal. Tourists present good income potential as they are normally willing to pay as much as double the local rate for a ride. But such opportunities are few and far between. "The tour companies have taken all our business," laments Khaled Al-Zir, a taxi driver who has worked in the town for over 20 years. "Only a few people have the courage to come through by themselves." He says that since the erection of the fence tourists have sought other means of entering the city. "In the years between [the signing of the] Oslo [Accords] and 2000 we could earn about NIS 600 a day," he says. "Now we earn about NIS 200. At the same time, the price of gasoline has gone from about NIS 2.50 a liter then to NIS 5 now." As a result Zir has had to take the two youngest of his six children out of private school and send them instead to a government-run school, which is afflicted by public-sector strikes. Some tourists wish to take cabs to Jericho or to Ramallah, but the IDF checkpoints often turn the journey into a frustrating and drawn-out procedure. Zir says that there have been many occasions when he has been en route with tourists to Jericho and has been refused permission to cross, apparently for no reason. The more remote the checkpoint the less predictable the outcome, he says. "When there are soldiers at a small checkpoint who want to make trouble, they will turn you back and not give you any reason." When this happens he is forced to take the back roads, which usually takes 40 minutes longer. Zir is, however, candid enough to acknowledge that the taxi drivers themselves are perhaps as much to blame for their loss of business as the IDF or tour companies. "There are certain drivers who are dishonest with customers," he says. "They will promise to take them to Manger Square for NIS 20, but they will take them to Herodion [on the eastern outskirts of the city] first and then say that because the trip took an hour they must pay NIS 100." Because there is no taxi rank, pursuit of a customer often turns into a free-for-all, where the loudest, largest and, according to Zir, most unscrupulous taxi drivers tend to get to the customer first. It is therefore unsurprising that many intimidated customers pay the hefty mark-up, creating paranoia and mistrust in many tourists. "Last week I had a German man and his son in my taxi," Zir recalls. "When I charged them NIS 160 for three hours they went to the police to try to get their money back. They thought I had stolen from them, even though the usual rate is NIS 70 an hour." Installing meters in the taxis would be a simple solution to the drivers' present lack of accountability, he says. "The German government actually donated hundreds of meters [to the Palestinian Authority] a few years ago, but when the government tried to sell them to the taxi companies, nobody would buy them!" On the upside, drivers are slowly coming to grips with customer service. If there is one thing an Arab taxi driver can be relied upon to do, it is smoking his way through a steady chain of cigarettes on the way to your destination. "Now we always ask the customer if they mind us smoking and if they say 'yes,' we put it out. Also if it is raining and we have the windows closed we will not smoke," Zir says. In the meantime, tourists seem happy to come here. Terje Pederson, a headteacher from Norway, relaxes in the cultural center in the center of town. Perhaps unusually, he has not come for any religious reasons, but to meet teachers from another country. "I came here 10 years ago. I liked it then and I still like it now. I think it feels safe. I do not feel like the town is very dangerous," he says. Rodney Koelmeyer, a tour guide from Sri Lanka, has been taking Catholics on pilgrimages to the Church of the Nativity since the '80s. Along with Nazareth and Jerusalem, Bethlehem is an integral part of his six-day tours. Even during the height of the intifada there was enough interest from Sri Lankans for him to take groups over, with one such visit just three days before the siege of the church in 2002. He disagrees with the perception that the town is unsafe, saying he has been there more than 300 times and has never seen any violence. However, his groups still do not stay overnight. They come for half a day, have three hours free time to shop and the rest for looking around the church. There are two reasons why Sri Lankan Catholics are prepared to visit Bethlehem when others are not, he says. "People's commitment depends on what country they come from. In Sri Lanka we have our own problems, so the violence here is not such an issue. But it also depends on your faith in God. We believe that God will protect us."