Plans underway for new Jerusalem hotel after city gets okay to raze central eyesore

Plans for a new hotel in Jerusalem are underway after the municipality secured an important court win earlier this year to demolish a major eyesore in the city center and rebuild from scratch.

The city has been working for years to get the site known as the “Dan Pearl Hotel” or the “Pearl of Jerusalem,” opposite the Old City’s Jaffa Gate at the end of the Mamilla precinct, cleared for rebuilding.

Tenders have yet to be issued for the new hotel but, after two decades of decay and litigation, the unhappy life of the existing building will soon come to an end.

For over 100 years, the building has been continuously occupied by hotel operations. The first in a series was built as the Hotel Howard in 1891. This was followed by Hotel Fast in 1907, and St Andrew’s House in 1918.

The Jerusalem Municipality purchased the site from the Armenian Patriarchate in 1974 and promptly demolished it. Developer greed meant that the site remained empty for a number of years. But eventually permission was granted for four underground floors and three floors above-ground, to deliver 110 hotel rooms and an indoor pool. Construction began in the early 1990s, and the Dan Hotel Group took on management, launching operations as the Dan Pearl in 1996.

Discount Bank, however, effectively closed down the hotel in 2000, issuing a liquidation order totalling NIS 170 million ($48 million) to the holding company that owned the site. There were no successful bids for the hotel and the Dan Group left when its management contract was terminated in 2003. A company owned by Poju Zabludovicz, a Finnish-born British billionaire businessman, bought the building and attempted to continue to run it as a hotel, but sold it to a French real estate company in 2007, and the hotel itself closed in 2008.

Having worked over a number of years with the French developers to revive the hotel, the Jerusalem Municipality finally lost patience and took them to court.

Over the intervening years, the developers had demolished interior floors and ceilings to support their claim that they should be exempt from property tax because the hotel was uninhabitable. Jerusalem drew up plans for demolition and rebuilding of a new hotel on the site which would be similar to the previous hotel in terms of its proportions. The developers refused to accept this offer and requested additional floors to raise the height of the building. The city refused to accept the proposal on the grounds that it failed to integrate with the surrounding urban landscape, a particular sensitivity given its proximity to the Old City.

In court, the municipality described the current structure as “an environmental hazard” and made clear that despite calling for the demolition of the structure, “it was committed to encourage and promote construction plans throughout the city, including plans for hotel and resort complexes.”

Initial plans for a rebuild were approved in 2019, according to a local report. These include about 150 hotel rooms, 20 residential units, and a commercial center on the ground floor.

Demolition equipment is expected to move in over the coming months.