Before the hotel was built the land was used by Native Americans for worship. After this in 1874 a small one room dirt floor school building was built, this was replaced by a bigger building in 1879 and again was extended in 1893. By 1916 the school was condemned as it was now in poor state and unsafe for use. The Babbitts purchased the land in 1919 with the intention of building a huge hotel, but this never happened and the scholl building remained empty. The land was then used for Hotel San Carlos which was being built to help meet the growing demand of tourism in the area. The hotel was going to be state of the heart and luxourious. In 1955 San Carlos underwent some remodelling to bring it up to date. In 1993 a the San Carlos Hollywood Star Walk was inlaid outside the hotel with names of the famous people such as Clark Gable and Jean Harlow, who had stayed at the hotel . Today the hotel still operates and retains many of its original features.

The hotel is thought to be haunted by a few ghosts including Leona Jenson who committed suicide by jumping from the seventh floor over a lost love, people have witnessed a white cloud of a figure and then breezes, also young boys have been heard running through the corridors and childrens laughter has been heard.