Five Star Ramallah

An international five-star hotel opens for business today in Ramallah, the West Bank city once synonymous with Yasser Arafat's besieged headquarters and Palestinian militancy.

The Mövenpick Ramallah – part of the Swiss chain – boasts five restaurants and bars, 171 rooms including two presidential suites, a range of luxury banqueting and conference facilities, a heated outdoor pool, a gym and – eventually – a spa.

Aimed principally at a business clientele, though also hoping to attract the growing number of tourists and pilgrims visiting the West Bank, the hotel will be formally opened next week by the Palestinian president, Mahmoud Abbas, 10 years after the project was begun and demonstrates the increasing political and economic stability on the region.

Its conception coincided with the outbreak of the second intifada. Eighteen months later, Israeli tanks rolled into Ramallah, destroying much of Arafat's presidential compound and pinning him into one wing where he remained under siege almost until his death in 2004.

"Ten years ago, the situation was very different," said Mövenpick's communications manager Katreena Khalil. "But Ramallah has been stable for a while. It's safe, secure and investors are coming fast. We're optimistic."

Daniel Roche, the hotel's French general manager, echoed this confidence. "We see a dramatic change in Ramallah – there are many upscale restaurants and bars opening, lots of construction of beautiful new buildings. Ramallah is booming."

He expected to see a return on the $42.5m (£26.4m) investment "very fast" with good levels of occupancy within a couple of years. Standard room rates will be $160-$200.

Economic growth in the West Bank reached 9% in the first half of this year, according to the World Bank. Much of this was due to the influx of donor funds, bolstered by improved economic management by the Palestinian Authority under its prime minister and former World Bank economist, Salam Fayyad, and the lifting of some checkpoints by the Israelis which have eased movement and access.

But the headline figures and the opening of a swanky hotel mask a complex picture of economic and political uncertainty – and a real threat of renewed resistance if peace talks fail, said Palestinian-American businessman Sam Bahour.

"There is a flurry of economic activity partly because Ramallah is the de facto capital while we wait for Jerusalem to be released and the hub of a lot of donor activity. But the number of cafes does not reflect real economic growth. We still have no access to real economic resources, such as water and borders."

The boom in Ramallah, he said, was "unsustainable growth not based on sound economic foundations" but instead on donor injections.

And there is little sign of prosperity being extended to small towns and villages in the West Bank where unemployment and poverty levels are high, movement is restricted, and harassment and violence from settlers is on the rise.

The Mövenpick hotel would probably eventually become profitable, although it would take a long time, Bahour said. "This is a high-risk market. Under the influence of occupation, none of us can plan profitability when we don't even know whether we can make a meeting on time [because of checkpoints]."

The hotel has recruited 260 staff locally – only six jobs are filled by foreigners – who have undergone intensive training to meet international standards of hotel service. Some will be making the daily commute to Ramallah from Jerusalem or Bethlehem, requiring passage through Israeli-controlled checkpoints. With an unemployment rate in the West Bank of almost 20%, there was stiff competition for the jobs.

Roche believes that the opening of the Mövenpick will lead to further job opportunities as investors draw encouragement from the international chain's confidence. "I'm not saying we are pioneers, but this is something new in Ramallah," he said. "People here need this to happen."