More prosaic voices say the bay and town were named for José Félix Trespalacios, who served as Mexican governor of Texas in 1822 and 1823. They’re probably correct, but if those hallucinating seamen had returned to the bay in 1905, they could have experienced their vision as reality. For in that year, an enormous hotel was moved from Palacios’ eastern edge to its southern shore, one-half mile away. Cut into three sections for the mule-powered trip, the wandering inn must surely have resembled the three palaces of Spanish legend.
Reassembled and expanded with loving care, the old Bay View Hotel became the Hotel Palacios. Today, this palace at Palacios welcomes guests as the Luther Hotel, having weathered not only the usual ravages of a century, but also several hurricanes and a 1944 fire that damaged its upper two stories.