In 1999, the General Assembly voted to invest around £10 million ($16 m) to upgrade the property. There was an uproar. Critics said it was scandalous to do this at a time when the Church at home was having to sell off properties and merge congregations, not to mention struggling to finance HIV/AIDS projects in Africa. But supporters of the development won the day, insisting that the hotel could become a place of reconciliation in the Middle East. The General Assembly was particularly won over by Palestinian Christian delegates, who pleaded with the Kirk not to abandon its position in Israel.
In the village of Reineh, near Nazareth, Father Samuel Barhoum tells me how proud he is of the links with the Kirk. "We are a forsaken minority here," he says, alluding to the fact that outside the Middle East many people are unaware that there are Palestinian Christians as well as Muslims. For him, the Scots Hotel in Tiberias is "an oasis".
The Church of Scotland is fiercely supportive of the Palestinian cause. But ironically the existence of the Scots Hotel - which relies to some extent on Israeli goodwill and receives hefty Israeli tourism grants - is said by some to tie the Church's hands.
Rooms here cost as much as £200 ($320) a night, which puts it out of reach of most local people. Certainly few Palestinians, who it was originally hoped might come here to rub shoulders with Jewish people, could stay here.
Churchmen were acutely aware that if they sold the property it would be bought by Israelis, which would be a blow not just to Christianity in the region but also to the Palestinians, whose cause the Church of Scotland strongly supports.
By Angus Roxburgh | Tiberias, Israel [BBC World Service website]
31 October 2012 Last updated at 00:44
Spot the odd one out: Hilton, Marriott, Radisson, Church of Scotland, Holiday Inn. Yes, you're right, they are all names of hotels apart from… but wait a minute, the Church of Scotland also owns a hotel, and a very splendid one at that. Very splendid, and very controversial too, since an organisation as thrifty and modest as the Scottish Kirk would not normally be expected to spend £13 million ($20m) building a luxury hotel. It also happens to be situated in one of the world's hotspots - northern Israel, not far from Syria and Lebanon, in the town of Tiberias, which only a few years ago came under rocket attack. So who is the Scots Hotel for, and why does the Church own it? It all started back in the 1880s, when a group of Scottish missionaries led by a surgeon, Dr David Watt Torrance, came to the Holy Land to preach, convert, and heal. Torrance built a hospital in Tiberias which served patients from as far away as Damascus. After the new Israeli state built its own hospital in the region in 1959, the three buildings housing the Scottish one were converted into a hospice for pilgrims, and then a modest guesthouse, owned by the Church of Scotland. By the 1990s, the guesthouse was crumbling due to lack of investment, and the Church faced a dilemma. Sell it - and its beautiful grounds by the Sea of Galilee, including a little cemetery where Dr Torrance and his family are buried - or invest in it...