Bethlehem is normally at its busiest at Christmas, but this year war has scared away tourists and pilgrims from the Palestinian town in the Israeli-occupied West Bank, leaving hotels, restaurants and souvenir shops deserted.

With global headlines dominating of the Hamas attacks in southern Israel, followed by Israel's military assault on Gaza and a rise in violence in the West Bank, business owners in Bethlehem said no one is coming.

"We have no guests. Not one," said Joey Canavati, owner of the Alexander Hotel, whose family has lived and worked in Bethlehem for four generations.

"This is the worst Christmas ever. Bethlehem is shut down for Christmas. No Christmas tree, no joy, no Christmas spirit," he said.

Located just south of Jerusalem, Bethlehem is heavily reliant for income and jobs on visitors from all over the world who come to see the Church of the Nativity, believed by Christians to stand on the site where Jesus was born.

Since the war started, everyone cancelled, including bookings for next year. "All we get on the email is cancellation after cancellation after cancellation," said Canavati.

He took Reuters TV on a tour of the hotel, opening doors to empty rooms and showing the silent dining room.

"We had at least 120 people having dinner here every night, and it was packed. The noise, the people. Empty. No Christmas breakfast, no Christmas dinner, no Christmas buffet," he said.

Ala'a Salameh, owner of falafel restaurant Afteem, said his business was operating at 10% or 15% of capacity, catering for local Palestinian families rather than the usual influx of foreign visitors.

He said he was keeping the restaurant open because his staff needed the work.

"I have workers, so from where I can give them money to take and to feed their families, their kids?" he said.

"We are praying for peace. For peace. You know, Bethlehem is the city where peace was born, so it should be the messenger for peace to be spread all over the world," he added.