Christmas is paying off in the area where it began

Strains of "Silent Night" stream from the tour bus speakers on what has become known as the Jesus circuit in Nazareth, northern Israel.

Locals joke that the carols constitute a new category of music in the largely Palestinian city, but the bigger joke, they claim, is making money selling Americans their own Christmas music.

"There have always been Christians who come to the Holy Land. But in recent years they come in huge groups, in tour bus caravans, in the thousands!" said Ibrihim Mansouf, a local shop owner in Nazareth. "They want to buy anything, anything that was made in the Holy Land."

Of the 3.5 million tourists that visit Israel each year, 2.4 million travel to Israel and the Palestinian territories for "Christian tourism" according to the Israeli Tourism Ministry.

It's a billion-dollar industry - one on which both Israeli and Palestinian businesses have just begun to capitalize. Officials said Friday that the turnout was shaping up to be the largest since 2000. Unseasonably mild weather, a virtual halt in Israeli-Palestinian violence and a burgeoning economic revival in the West Bank all added to the holiday cheer.

By nightfall, a packed Manger Square in the West Bank town of Bethlehem was awash in red, blue, green and yellow Christmas lights.

Merrymakers blasted horns, bands sang traditional Christmas carols in Arabic, boy scout marching bands performed and Palestinian policemen deployed around the town to keep the peace.

"The Holy Land is becoming the heart of life for people of faith across the entire world. Christmas is a tradition of this land, and all the inhabitants can enjoy the atmosphere and message of peace that the season brings," said Father Pierbattista Pizzaballa, the custodian of the Holy Land, who oversees Israel and neighboring countries on behalf of the Franciscan Order.

In recent years, there has been a boom in sites and services that mix modern-day tourism with biblical stories. In the north, tourists can visit the "Nazareth Village" a re-creation of life in the time of Christ, complete with wandering shepherds and carpenters who interact with guests.

Following Jesus' path

The "Jesus trail" begins just outside the city, and allows the hardy to walk - quite literally - in the footsteps of Jesus. It's 40 miles long and takes three to five days to cover. Across the north of Israel, Maronite Christian villages offer one-week Aramaic courses based on readings from the New Testament, as well as walks along the hills where Jesus is said to have given the sermon on the Mount.

All of this before tourists even get to Jerusalem or Bethlehem.

"Tourism is a bridge to peace and dialogue among cultures," Israeli Tourism Minister Stas Misezhnikov told reporters recently. In recent years, his office has worked to establish access to tour sites in Israel, as well as in the Palestinian territories, he said.

"If I can bring in three more tourists, and two of them visit the Palestinian areas, they will create employment there. This is a win-win situation for Israel and the Palestinian Authority," said the Russian-born Misezhnikov.

The Associated Press contributed.