Once a pasha's palace, this cool limestone oasis with its flower-filled inner courtyard and gorgeous garden is in a class of its own—no wonder it's a favored haunt of statesmen, stars, and spies. It's a 10-minute walk from the Old City 's Damascus Gate but shielded from the hubbub of East Jerusalem. Owned by a British family, managed by a Swiss company, and staffed mainly by local Arabs, the American Colony combines the best of all these disparate worlds. The turquoise-and-blue
tilework, Damascene wood inlay, and potted palms in the elegant vaulted lobby lead to historic rooms with rug-strewn flagstone floors and antique painted-wood ceilings. The Palm House oozes ancient style through modern amenities.