The Israeli government is set to approve government grants for building hotels in the 1967-Occupied Palestinian Territories, particularly in Occupied Jerusalem, which will speed up the establishment of Israel's plans for "Greater Jerusalem". Haaretz newspaper has described the government's decision to approve a draft resolution as the first of its kind.

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An Israeli law of 1959 only allows governments to give loans and grants for construction purposes within Israel itself. The latest move will give the go-ahead for hotels to be built inside illegal settlements on occupied territory near Jerusalem, the most notable being Ma'aleh Adumin and the Gush Etzion bloc to the south of the city. The decision by the Ministry of Tourism is intended to ease the pressure for hotel rooms in Jerusalem.

According to Haaretz, the draft recommends that an additional 9,500 hotel rooms will be needed to accommodate the increasing number of tourists coming to Jerusalem from around the world. The newspaper noted that a 2010 study commissioned by the same ministry projected shortages of hotel rooms in Jerusalem.

Critics of the scheme contend that the shortage of hotel rooms is a side-issue, and that the main reason for the proposal to build hotels in the illegal settlements is to boost Israel's Judaisation plans for "Greater Jerusalem" and take even more Palestinian land. An article by Ron Pundak of the Palestinian-Israeli Peace NGO Forum in Haarez on 1 August referred to "the prime minister's policy of de facto annexation of the West Bank". The hotel scheme, claim Palestinians, has to be seen as part of the same process.