Thousands of Christian pilgrims gathered in Bethlehem's Manger Square on Wednesday to celebrate Christmas under the protection of security forces loyal to Palestinian President Mahmoud Abbas.
About 500 security men arrived from the West Bank cities of Ramallah and Jericho to provide security for the holiday. Similar deployments have taken place across the West Bank over the past year with US backing.
"We expect about 40,000 visitors in Bethlehem this week," said Khouloud Daibes-Abu Dayyeh, the Palestinian Authority's minister of tourism.
The estimate includes Christians from the West Bank, the Gaza Strip, Israel and the rest of the world. About 900 from Gaza applied for Israeli permission to go to the site where Christians believe Jesus was born, but only 300 got it.
"It's better to spend Christmas in Bethlehem because we are close to the church. It's important to visit where Jesus was born," said 58-year-old Italian tourist Messimo Silzestri beneath a giant Christmas tree and decorations in Manger Square.
While Gaza teeters on the brink of a major crisis following the end of a six-month truce between Israel and Hamas Islamists in control of the strip, a decline in violence in the West Bank has tempted back tourists who no longer fear gun battles in the streets.
Christmas Mass in Bethlehem (Archive photo: AFP)
Israel attributes this partly to the barrier it is building in and around the occupied West Bank. For Bethlehem, the barrier takes the form of a daunting concrete wall 4 meters (13 feet) high with watchtowers.
Tourism collapsed here when a Palestinian uprising against Israeli occupation began in 2000. But this Christmas, the Palestinian tourism minister says, hotel occupancy is rising.
"The increase in security and easier movement means we have our largest numbers, and we are making great efforts to restore tourist activity," she told Reuters in Ramallah.
"The numbers themselves are not as important as the length of stay," she added. The direct contribution of tourism to the Palestinian economy is reckoned at about $480 million a year.
Palestinians say the Israeli barrier is a major obstacle to peace that cripples trade and turns off foreign tourists.
Many visitors see the wall between Jerusalem and Bethlehem as an ugly scar defiling a Christian holy site.
"Going to the checkpoint and the barrier is really crazy. But being here, it is totally worth it," said 20-year-old Emma Serienni who was on her first visit from the United States.
Israeli Prime Minister Ehud Olmert on Tuesday said the Jewish state must press on with plans to complete the barrier around key parts of Jerusalem, which could be divided in a future deal to create a Palestinian state.
There is little prospect of an Israeli-Palestinian peace deal by the time Pope Benedict visits Bethlehem in mid-May 2009.