It was developed and opened in 1970 by Donald M. Denlinger, who started with 19 surplus cabooses purchased at auction from the Penn Central Railroad.

The ticket counter of the Strasburg Rail Road, an almost two-hundred-year-old heritage railway,[6] is 0.25 miles (0.40 km) away, and its tracks run past the motel.

[5] In the summer of 1969, Denlinger bid on 19 cabooses which the Penn Central Railroad was auctioning as surplus from its rolling stock "graveyard" in Altoona.

In a conversation a week later, he mentioned this to his childhood friend Walter Frey, a Penn Central employee, who informed him of the impending auction.

[3][8] On January 4, 1969, a Penn Central official called Denlinger to tell him that nine of his cabooses were on a siding at Leaman Place, Pennsylvania and needed to be removed that day to escape demurrage charges.

(He had made arrangements with Penn Central to store the remainder of the cabooses and the dining car for an additional year.

[16] After a hasty search during a blizzard, Denlinger found an unused siding for a feed mill at Gordonville, Pennsylvania, about a mile west of Leaman Place, and arranged to accommodate the cabooses there.

Many suitable properties were owned by Amish people who would not lease land to a commercial operation such as a motel because of their religious beliefs.

[20] The engine successfully backed seven cabooses over the curved track of the temporary junction into the motel site but the much longer coach derailed.

With no crane available, house jacks were eventually used to rerail the car and the steam engine, having been refilled with water from a fire department tanker, pushed the train farther before the coach derailed again.

Each caboose was equipped with a non-functioning potbelly stove that had a black & white television inside and a lamp hanging from the articulated stovepipe overhead.

Denlinger and the renovation contractors did not realize that the cabooses had three-inch-thick concrete floors to lower their center of gravity, necessary when moving at high speed.

[7][16] On opening day in May 1970, 4,500 people came to see the motel,[3] then made up of ten cabooses and one dining car serving breakfast only.

[28][29] On May 10, 1980, to commemorate the 150th anniversary of the legendary Great Train Race, a reenactment was held between Strasburg Rail Road Steam Locomotive #90 and a historic stagecoach purchased by Denlinger for the event[30] drawn by four horses.

[10] Diners can view passing steam trains on the nearby Strasburg Rail Road,[23] the oldest continuously operating railroad in the western hemisphere.

The museum displayed 170 steam whistles ranging in size from four inches (100 mm) to nearly six feet (1.8 m) and weighing up to 375 lb (170 kg).

The collection included railroad crossing markers and other signs, heralds (logos), semaphore signals and engine plates.

[35] Denlinger, who died in 2008,[28] retired from the operation after 22 years in February 1993 when it was sold for $1.3 million to Kevin and Susan Cavanaugh and partner Peter Botta.

[36] In August 2001, the owners were Wayne Jackson and Scott Fix, according to a report about a potential sewer violation lodged by the town of Paradise.

[40] Pennsylvania attorney general Jerry Pappert sued for restitution of booking reservation deposits not returned after the closure.

[5] The motel was called "world famous" in a 2005 book on American culture,[8] noting that the motel has been featured in National Geographic, Reader's Digest, Ripley's Believe It or Not!, and the Chinese Life magazine and said its popularity "made it a destination for tourists from throughout the world as well as a landmark on the American road".