When the Colonial opened its doors, the era of the grand hotels was in full swing and Bethlehem was a premier destination resort town.

Because of its sophisticated clientele the Colonial quickly became a venue for movie studios to test market their films.

In the summer of 1914, as documented in K. Abbott's 1950 memoir Open for the Season, Abbott, with his then-partner "Doc" Clark, converted the family stables to a garage for automobiles, then looked further: "The vacant lot across the street at which I happened to be looking suddenly took on a vision — before my eyes rose a modern movie house with electrically lighted marquee."

By spring of the following year construction was complete and the Colonial Theatre opened for business on July 1, 1915, with a showing of Cecil B. DeMille's The Girl of the Golden West.

In 1922, overwhelmed with the operation of the Profile House, Karl sold the Colonial, still legally owned by Abbott and Clark, to Jack Eames, a local resident who was president of the Interstate Amusement Company.