Why Gaza's only five-star hotel is a symbol of destruction - but also economic promise

Waterfront property and developments could help earn Gazans the funds needed to rebuild the enclave - if allowed to

Devastation in the area of Al Maqousi Towers, Al Mashtal Hotel and Al Khalidi Mosque, after the Israeli army withdrew from north of Gaza city.

Gaza’s Al Mashtal Hotel, the only five-star hotel and prime luxury escape in the besieged enclave, was destroyed amid Israel's bombardment. This also demolished the valuation of the resort region that was seen as a way for Gaza to attract funds and rebuild after a year of war.

The plush hotel in northern Gaza that once overlooked the Mediterranean now lies in tatters, its 220 rooms and luxury suites destroyed. In images posted on social media, the eight-storey hotel's roof appears to have collapsed, with broken walls, destroyed trees and furniture scattered around.

Gaza is a densely populated area and, before the war began on October 7, the beach and the shore were among the few places for recreation, especially during summer. That made the area valuable for building hotels and resorts.

The attacks on Gaza have killed more than 41,700 people, caused mass displacement and damaged social, physical and productive infrastructure at an unprecedented speed and scale. The war has destroyed about 70 per cent of the enclave's infrastructure, inflicting huge damage to its economy.

The luxury property was renovated and rebranded as Ayan Hotel before the war by Palestine exchange-listed Padico Holding, which also has investments in other sectors of the Palestine economy, including telecoms, finance, industries, infrastructure and energy. The hotel was completely destroyed in late 2023, in the ongoing cycle of rebuilding and destruction. In 2008, it suffered damage when Israel launched a three-week offensive against Hamas, firing two missiles into the hotel.

Pillar of luxury

An important landmark in Gaza's real estate market, Al Mashtal hotel stood as an edifice of what the enclave could offer to bring in investment and rebuild its foundations, rather than relying on aid. The constant destruction and reconstruction also exemplified the resilience of the enclave.

Construction of the hotel began in 1996, but was halted several times because of conflict, The Guardian reported in 2011. The building was damaged during the war between 2008 and 2009, before it was finally opened in 2011 after renovation. Other properties along the coast have also been destroyed, including Blue Beach Resort, also owned by Padico Holding, as Israel continues to attack Gaza.

“Everything in the Gaza Strip has been erased,” Farid Al Qeeq, professor of urban planning and design at the Islamic University of Gaza, told The National. “According to UN and World Bank statistics, about 70 per cent of all residential units and all facilities, educational, health care and all kind of infrastructure have been fully or partially destroyed, including Al Mashtal hotel and the Blue Beach Resort.”

It is not known to what extent Padico suffered losses due to the destruction, but Mr Al Qeeq estimated the cost of the two hotels to be more than $30 million. In its annual statement, Padico said the scale of damage and losses caused to its investments in the Gaza Strip as a result of the war was “significant”, without offering a value. It said the two hotels were destroyed in the Israeli bombardment.

The properties were “built before 2000 when the Palestinian Authority was very promising and everyone was talking about maybe changing Gaza to Singapore,” Mr Al Qeeq said. “But after 2000, the Second Intifada and after that period, we experienced about five wars before October 7. So there was a lot of political unrest, which did not encourage any new investment in Gaza.”

But he said there was great potential for property development along the coast if the war ends and peace returns to Gaza. “Gaza beach is one of the most beautiful in the world with sunny weather,” he said.

Before the war, the price of one donum (1,000 square metres) of land in Gaza overlooking the sea was about $1 million. But the value has dropped by 50 per cent since the war started.

Property developers were buying land along the coast to build multistorey buildings, usually six to eight floors, with four apartments on each level, as well as restaurants, cafes and recreational areas. An apartment in each building was expected to cost between $100,000 and $120,000.

“Very few people are thinking of buying a piece of land right now, as everything has been destroyed in Gaza and the economic situation is very hard and most people have little money,” he said.

A year to destroy, decades to rebuild

Gaza’s economy has suffered huge damage, with its gross domestic product plummeting by 81 per cent in the last quarter of 2023.

It is expected that it will take decades to repair the damage to Palestine's economy, with the scale of devastation far surpassing the impact of conflicts in 2008, 2012, 2014 and 2021, UN Trade and Development said in a recent report last month.

The damage to critical infrastructure in the first four months of the latest Israeli bombardment of the enclave is estimated at $18.5 billion, a joint report by the World Bank and the UN said in April.

“The shock to Gaza’s economy as a result of the ongoing conflict is one of the largest observed in recent economic history,” the World Bank said at the time. “The magnitude of loss of life and the rapid and extensive damage to infrastructure surpass any benchmarks set by historical precedents both within the region and in recent global conflicts.”

The damage has affected every sector of the economy, with housing accounting for 72 per cent of the total cost, at $13.2 billion, and public service infrastructure, such as water, health and education, accounting for 19 per cent. About 62 per cent of all homes in Gaza, equal to 290,820 housing units, were either damaged or destroyed in the first four months of the war, the report added.

Commercial and industrial buildings also suffered heavy damage, accounting for 9 per cent of the total cost, at $1.6 billion.

Global interest in Gaza's promise

Former White House adviser Jared Kushner previously remarked on the “very valuable” potential of Gaza’s waterfront property, but experts criticised his comments and said his views on development in the enclave were not only an example of a shared goal with Israel to erase Palestinians from the territory, but also monetise from it.

“I really would not want in any way to entertain or give any weight to the genocidal fantasies and financial concerns of Jared Kushner, which assume removal of the Palestinian people and extension of Israel's pricey waterfront property area southward,” said Raja Khalidi, director general of the Ramallah-based Palestine Economic Policy Research Institute.

He added that reconstruction of Palestine “will be a Palestinian task, shaped by our national aspirations and visions, and powered by the enormous potential of Palestine's people”, which can only be done when Israeli forces withdraw to the 1967 borders.

That is “something that Kushner and the Israeli government seem dead set against”, he said.

“It is grotesque to have political figures and developers talking about plans for beachfront property in the enclave to be built up for tourism,” said Zaha Hassan, a fellow of the Middle East Programme at Carnegie Endowment for International Peace. “It will take decades to remove the rubble in Gaza and to recover the bodies of those killed in Gaza for a dignified burial.”

Natural gas wealth

Hope for Gaza's future is not limited to its shoreline. Gaza Marine gasfield, discovered in 2000, is estimated to hold up to a trillion cubic feet of gas. But its development remains stalled, as the enclave is denied access to its own natural wealth.

Gaza Marine gasfield is 30km off the coast, in the Eastern Mediterranean. “There is no official timeline regarding drilling and exploitation of the field,” said Connor Coleman, country analyst, Middle East and Africa at the Economist Intelligence Unit. “Further progress is unlikely at least until security conditions – both in Gaza and regionally – have stabilised.”

Gas extracted from the area “would be sufficient to supply power to Palestine and potentially to export abroad”, he added.

A few weeks after the war began, Israel awarded gas exploration licences to six companies, including Italy's Eni, Britain's Dana Petroleum and Israel's Ratio Energies, which significantly overlap with the maritime borders of Gaza. In February, four human rights organisations in Israel and Palestine – Adalah, Al Mezan, Al-Haq and the Palestinian Centre for Human Rights – issued a joint release regarding the licences in Palestinian waters.

The groups urged companies to refrain from signing any of the licence documents and to “desist from undertaking any activities in areas of Zone G that Palestine claims, as any such activities would constitute a flagrant violation of international law”.