Blair said tourism represents both a "huge economic opportunity for the Palestinian people" and "a huge support to the peace process."
Blair, who serves as special envoy for the Quartet on the Middle East, a diplomatic peace initiative, said the peace process is "at an absolutely critical juncture" but that any political agreements must be accompanied by economic growth.
Blair made the comments in a keynote speech at Conde Nast Traveler magazine's World Savers Congress, a conference on global and environmental challenges in the travel industry.
Blair cited statistics showing increases in visitors to both Israel and in the West Bank in recent years. While there has always been tourism to Christian, Jewish and Muslim holy sites in the Middle East, statistics for 2009 from the U.S. Office of Travel and Tourism Industries do show an 8 percent increase in U.S. residents traveling to Israel compared to 2008. In contrast, travel to many other popular destinations was dramatically down last year due to the recession.
Blair attributed the rise in Holy Land tourism mainly to increased security in the West Bank but cited many other factors, including construction of new hotels in the West Bank, lifting of restrictions on visitors, growth in investment, cooperation among government officials, and investment by the Israeli and Palestinian private sectors.
In the last few years, Palestinian president Mahmoud Abbas has successfully enforced law and order in the West Bank, with police visible in the streets. At the same time, the Israeli military has dramatically scaled back activity in the West Bank, some checkpoints have been taken down to promote movement, and the economy in West Bank cities is booming, with boutiques and coffee shops flourishing in Ramallah and a shopping mall and cinema in Jenin.
Blair noted that while Gaza is not safe enough for mainstream tourism, the locals are interested in hosting tourists.
Also speaking at the Conde Nast event was Sir Richard Branson, founder of Virgin Atlantic Airlines. Branson said his company had "made a mistake of investing in corn ethanol" as a potential jet fuel because of its impact on the world's food supply.
Branson said he is now "putting a lot of money into development of algae." He said if algae lives up to its potential, he'd like to see it used in all Virgin planes as soon as 2020.
Branson said "realistically people are never going to fly less" so the airline industry must "come up with alternate energies" in order to help mitigate climate change.