Until 1849 there was no regular transport between the Isles of Scilly and mainland Britain. The Scillonians decided to fix this themselves by commissioning a sloop, the Ariadne, and finding a skipper willing to make the unpredictable run from Penzance. Captain Frank Tregarthen took the job, brought the Ariadne to Scilly in 1849, and put her into service in 1850. He carried mail, provisions and the occasional adventurous passenger. Between 1849 and 1858 he and his three daughters opened the family house at the foot of Garrison Hill to those passengers - and Tregarthen's Hotel was born, the first hotel ever established on the Isles of Scilly. The Ariadne could take a day or two to cross from Penzance, sometimes longer in heavy weather. There was no point pretending the trip was anything but an expedition.

Tourism on Scilly began in earnest in 1859, when the Cornwall Railway line from London reached Penzance. Suddenly the islands were within reach of a Londoner who could spare a few days. The Ariadne was replaced by the steamer Little Western - a small steam-packet boat with a crew of five: captain, mate, engineer, deck-hand and stoker - and now the crossing took just four hours. Captain Tregarthen was her skipper from 1859 to 1870. The Little Western made roughly three round trips a week and ran year-round, which was extraordinary for a vessel of her size in those waters. In 1871 she was transferred to the West Cornwall Steam Ship Company for £2,640. On 6 October 1872 she was wrecked on the Wells Reef while trying to assist a disabled brigantine. The hotel's old logo carried her image, and the seafront deck was for many years called the Little Western Deck.

The hotel's guestbook reads like a chapter from a novel that could not quite decide what kind of book it wanted to be. Wilkie Collins stayed one night in 1855 during a twelve-day cruise around the Scillies. Alfred, Lord Tennyson wrote much of Enoch Arden during his stay in 1860 - a plaque on the wall now marks the rooms where he worked. Around 1903, Dr Hawley Harvey Crippen - who would later be hanged for murdering his wife - stayed at the hotel with that same wife, Cora, an aspiring music-hall performer known as Belle Elmore. While in residence, the doctor reportedly assisted in delivering the local boatman's wife's baby daughter. The royal visits are more recent and less infamous: Prince Charles came twice for Duchy Tenants meetings, Queen Elizabeth II attended an official reception for ninety on 3 June 2011, and Queen Camilla took lunch on the terrace on 20 July 2021.

The hotel had one near-disaster and one wartime requisition in its first century. On Sunday 26 February 1905 a defective chimney caught fire and the blaze spread to an adjoining bedroom; the damage came to fifty pounds, and the hotel reopened. During the First World War the Admiralty commandeered Tregarthen's, commissioned the building on 1 June 1918 as a Ward Room for officers billeted at the White House on the Garrison, and surrendered it back to civilian use on 28 February 1919. Commander HW Randall RNR was the Senior Officer in charge. The hotel passed out of the Tregarthen family in 1915 when a company was formed with the Penzance estate agent WH Lane as chairman. The Lane family ran the place for a century until 2015, when Nigel and Jackie Wolstenholme - whose other interests include the Somborne Valley Vineyard in Hampshire - bought it as their first hotel venture.

Tregarthen's has been a quiet patron of Cornish pilot gig racing since 1999, when the hotel donated a six-oared gig - named Tregarthen's - to the Isles of Scilly Rowing Association to mark the hotel's 150th anniversary. The Cornish pilot gig is the open rowing boat that nineteenth-century pilots used to race out to incoming ships and offer their services as harbour pilots. The first crew to reach a ship got the work, so the gigs evolved into some of the fastest rowing boats ever built. The hotel donated a second gig in 2012 during the World Pilot Gig Championships - a 36-year-old event held every May Bank Holiday weekend at the Isles of Scilly. The championships now draw thousands of rowers from across the world to compete in the same waters Captain Tregarthen first crossed under sail in 1849.