The site of Derby Castle (northern end of the Douglas Promenade) was originally owned by the fourth Duke of Atholl (1755-1830), who in 1822 developed the land and subsequently built Strathallan Crescent. In 1831 his estate was sold to a retired military man called Major Samuel Pollock (c.1785-1865). By 1837 Pollock had built Strathallan Lodge (now the Terminus Tavern pub, Douglas) as his private residence and the castellated building named Derby Castle, which was occupied by a succession of tenants over the next forty years. In 1876 the Derby Castle estate was purchased by Alfred N. Laughton (1828-1911) a lawyer from Yorkshire who was a long-term Douglas resident.
In the late nineteenth century the Isle of Man tourism industry was expanding and Laughton decided to create a pleasure park in Derby Castle’s grounds and turn the building into a hotel. To finance the venture Laughton formed a private company in 1878 with six businessmen and called it the Derby Castle Hotel and Pleasure Grounds Company. The Isle of Man tourism trade was developing fast and Derby Castle needed to expand to compete with competition. To finance this expansion Laughton decided to turn the Company into a public one with ninety other businessmen and thus in 1884 the Derby Castle Company Limited was created. A new pavilion was built in the grounds by Douglas architect William R. Rennison (1840-1900), which contained a ballroom and theatre with multiple attractions including gardens, a type of roller coaster, a swimming bath for aquatic exhibitions and firework displays.
An original partner of the dissolved Derby Castle Hotel and Pleasure Grounds Company Limited was John A. Brown (c.1839-1925). He was editor and proprietor of the Isle of Man Weekly Times and Daily Times. In the 1880s Brown branched out on his own in the entertainment industry. He was chairman of the Manx Syndicate (formed in 1888) who had acquired the Castle Mona estate and turned it into the Palace entertainment complex. By the 1890s competition was stiff amongst the Island’s entertainment businesses, with numerous Douglas venues such as the Derby Castle, the Palace Ballroom, the Marina Pavilion (later the Gaiety Theatre) and the Falcon Cliff. The result of this competition caused the value of Derby Castle Hotel and Pleasure Grounds Company Limited shares to halve. It was decided that a merger of the entertainment companies was necessary if the Island’s tourist industry wanted to survive. Therefore in 1898 and under the leadership of John Brown, the Company incorporated Derby Castle, the Palace ballroom, the Marina Pavilion and the Falcon Cliff, to form the Palace and Derby Castle Company Limited. Later incorporations and developments included venues such as White City (an amusement Park on Onchan Head), the Grand Theatre, the Palace Coliseum, the new Palace Opera House (now the Palace Cinema) and numerous cinemas and dance halls around the Island. Notable performers at the Palace and Derby Castle Company venues included Marie Lloyd, Vesta Tilley, Florrie Forde, Harry Lauder and the Rolling Stones.
During the two World Wars the Palace and Derby Castle Company properties were utilized for wartime efforts. For example during the First World War the Derby Castle ballroom was used as a factory to produce garments and airship ballonets and in the Second World War this property was used to store the seafront hotels and guesthouses’ carpets and floor coverings. This was because many of the hotels and guesthouses were used as internment camps for enemy aliens. The late 1940s saw a resurgence of Island tourism however by the 1950s onwards the Isle of Man tourism trade had competition from cheap package holidays to the Mediterranean. By the late 1960s the loss in tourist numbers was too great and it was decided to sell most of the Company's properties, making way for new developments such as Summerland (Derby Castle site) and the Palace Hotel & Casino.