Bethlehem has seen a record number of tourists this year and its thousands of hotel rooms are fully booked for Christmas week, thanks to steadily declining violence in the West Bank over the past few years.
It is a welcome bit of good news in a period that is otherwise gloomy, with a U.S.-led Israeli-Palestinian peace effort appearing to have run aground.
So far this year, 1.4 million tourists have visited the traditional birthplace of Jesus and 90,000 are expected during the Christmas season, a significant increase over last year, according to Israeli government figures. The numbers of visitors have been rising steadily in recent years.
"We believe that the economic situation in comparison to previous years is more stable and is improving," said Samir Hazboun of the Bethlehem Chamber of Commerce.
The town's 2,750 hotel rooms are booked solid for Christmas week and four more hotels are under construction. The expected turnout for Christmas week is up strongly from about 70,000 last year.
Tourism is one of the few areas of strong Israeli-Palestinian coordination. Israel's military says it has been in contact with the patriarchs and religious leaders of the various Christian sects to coordinate motorcades into Bethlehem for the Christmas Eve Midnight Mass. An Israeli security barrier snakes through the southern end of the town and is a source of friction with the residents.
Tens of thousands of foreign tourists are expected in Manger Square in front of the Church of the Nativity for Christmas Eve celebrations. The travel can be a chore: They must cross through a gate in the 30-foot wall built by Israel to keep Palestinian attackers out of Jerusalem, just 3 miles away.
The Bethlehem they find may be different from what many expect: for one thing, Christians have lost their majority: More than two-thirds of the 50,000 Palestinian residents are Muslim.
Still, the town does its best to take advantage of its place in Christian history, going so far as to link the Christmas nativity story to the fact that it houses the West Bank's best maternity facility.
The placement of a maternity hospital in Bethlehem is no accident, said Jacques Keutgen, director of the Holy Family Hospital, situated just half a mile from the Church of the Nativity, which marks the traditional birthplace of Jesus.
"This is the birthplace of Jesus Christ, so it is very important that people here have the possibility to deliver safely and in peace," he said.
The hospital has been a Bethlehem institution since 1882. Political violence caused it to shut in 1985, but the Sovereign Order of Malta, a lay Roman Catholic order, reopened it as a maternity hospital in 1990.
The old building hosts advanced facilities. One wing houses the Palestinian territories' only intensive care unit for severely premature babies. Its 18 incubators often hold tiny babies born as much as three months early. The building's corridors surround a courtyard with a statue of Mary and Jesus amid rows orange trees.
The hospital also specializes in multiple births.