The town of Christmas is repackaging itself.

After a bad tourism slump during intense Israeli-Palestinian fighting, pilgrims are back in large numbers, once vacant hotels are filling up and Jesus' traditional birthplace is even branching out.

A $23 million convention center is opening its doors for the first time this week for an international investors' conference, and Bethlehem hopes there'll be many more lucrative gatherings in the future.

If there's a recovery in the Palestinian economy after years of downturn, it'll happen in Bethlehem first, the town's boosters said.

On Tuesday, Bethlehem was primping for the upcoming three-day conference which will draw more than 1,000 business people, bankers and government officials from the Palestinian territories, the Arab world and beyond. Rows of small trees were hastily planted along the main road, work crews hoisted aloft by cranes fixed street lights and bulldozers pushed away roadside rubble.

"I think this economic conference will create a new era in this city," Mayor Victor Batarseh said.

However, it would likely take a lot more than tree-lined streets and a 2,800-seat convention center to persuade investors to risk their capital in the turbulent Palestinian territories. Only six years ago, Bethlehem's Church of the Nativity was the scene of pitched gunbattles between Israeli troops and Palestinian militants, and armed groups ruled the streets.

Calm has since returned to the city, but violence might erupt again if the current Israeli-Palestinian peace talks fail, as many expect. The first sight for tourists as they enter Bethlehem is a towering gray cement wall — part of Israel's West Bank separation barrier, built in response to the fighting.

Nonetheless, optimism is palpable here after so many gloomy years. In the last three years, Israel has considerably eased the passage of tourists into the city, even posting a Tourism Ministry representative on the border crossing to ensure the flow of buses.

The average occupancy rate at Bethlehem's 28 hotels jumped to 55 percent at the end of 2007, up from 10 percent just three years earlier, said Samir Hazboun, head of the local chamber of commerce. This week, he said, many hotels are fully booked because of the conference, and hoteliers expect 2008 to be their best year since the outbreak of the Palestinian uprising in 2000.

Several hotel owners are even planning to expand, hoping to find investors at the conference.

Sari Alyatim wants to add 100 more rooms to his 54-room Golden Park Resort, and is looking for partners to put up $2 million for the expansion. The Bethlehem dentist said he and his brothers already sank all their savings into the hotel, which has a small pool and restaurant, but often stood empty during the bad years.

In the past month, more than half his rooms have been booked, and Alyatim said he expects even better business in the future.

Batarseh and Hazboun said one of Bethlehem's biggest draws for conventioneers, in addition to the holy sites, would be the price. Food and lodging are far cheaper in Bethlehem than in neighboring Jerusalem, a veteran host of conventions.

Israeli officials say they support both the investors' conference and the revival of tourism in Bethlehem. Israel has issued hundreds of visas and visitors' permits to those attending the conference, including more than 100 business people from blockaded Gaza.

Rafi Ben-Hur from Israel's Tourism Ministry said a Bethlehem boom benefits everyone. "They (the Palestinians) can earn from it, we can earn from it," he said. "This is the Holy Land. You cannot put too many barriers."

Tourist Stuart Smith, 41, from Owings Mills, Md., said the bus carrying his tour group was quickly waved through the passage built into the barrier, and that he felt safe in Bethlehem. Standing in Manger Square, the drivers' license tester summed up his first impressions of Jesus' birthplace: "Very busy, very dirty, all sorts of very interesting smells, but I love it."

With 23 percent unemployment, the Bethlehem district, home to 185,000 Palestinians, has done better economically than other parts of the West Bank, but for some of the jobless, the boom may be too slow in coming. Unemployed university graduate Said Taameri, 25, who has a degree in sports and tourism, said he's set himself a year-end deadline to find a job. If not, he said, he'll emigrate to Europe or the U.S.

In the meantime, Taameri is loitering outside the Church of the Nativity every day, trying to persuade tourists to shop in nearby souvenir shops in the hopes of getting a commission from the owners.

But Hazboun, the chamber of commerce chief, counseled patience, saying the conference could be a turning point for Bethlehem. "If we can succeed to offer something attractive, this will benefit the city in the long run," he said.