A historic Victorian hotel housed in an 1889 Richardsonian Romanesque brick building, famously operating as a seaport brothel in the 1920s.
The Palace Hotel occupies the Captain Tibbals Building, a striking three-story Richardsonian Romanesque brick structure standing at 1004 Water Street. Built in 1889 at a cost of $28,000, the property was financed by Captain Henry L. Tibbals, a retired mariner who had famously salvaged a fortune in silver from a sunken Spanish frigate before serving as Port Townsend's sheriff, postmaster, and county commissioner. Designed by architects Whiteway and Schroeder, the building features a deep red brick facade accented by soaring arched windows that appear to stretch across two stories, framed by twin columns that bracket each window bay. The ground floor originally hosted a billiard parlor and three saloons, including the popular Townsend Tavern, while the upper levels were reserved for furnished rooms. This grand design was a product of Port Townsend's late-nineteenth-century boom, built with the expectation that the seaport would become the premier shipping hub of the Pacific Northwest.
Between 1925 and 1933, the upper floors operated under the name of the Palace Hotel, though locals widely knew the establishment as "The Palace of Sweets," a notorious seaport brothel managed by a madam named Marie. The business catered to the steady stream of sailors, loggers, and merchants passing through the busy docks until a mid-1930s raid by the county sheriff forced Marie and her workforce to shutter the operation and leave town. The building transitioned through various uses, housing newspapers, offices, and retail shops, before a meticulous interior restoration project began in 1976. Completed in the mid-1980s, the restoration preserved the building's historic character, converting the upper floors back into a functioning hotel. Today, the nineteen guest rooms and suites pay direct homage to this colorful chapter, with each room named after one of the women who once lived and worked here, including Miss Abigail, Miss Rose, and Miss Sara.
Inside, the hotel is a living museum of Victorian design, characterized by fourteen-foot ceilings, creaking timber floors, and clawfoot tubs. On the second floor, guests will find a quirky lampshade crafted from a vintage corset, a playful nod to the building's past. The premier accommodation is Room 3, known as Marie's Suite, a spacious corner room overlooking Port Townsend Bay with water views in two directions, a private kitchenette, and period antiques. The hotel is also widely reputed to be one of the most haunted locations on the Olympic Peninsula, centered around the legend of the "Lady in Blue". A large portrait of this mournful figure hangs above the main staircase, believed by many to represent Miss Claire, the namesake of Room 4. Guests staying in Rooms 3 and 4 regularly report unexplained occurrences, from the sound of jangling keys to shifting shadows, adding a layer of spectral intrigue to the historic, antique-filled hallways.
Ask the front desk to see the lobby's 'Ghost Files' binder, a collection of guest-written accounts detailing paranormal encounters with the hotel's resident spirits, particularly the Lady in Blue.
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