When longtime hospitality professional Clay Bales arrived in Montrose, Colorado, he saw the potential for the small, historic town to take off. With the purchase of a then-113-year-old building and plans to renovate it into a boutique hotel, he placed a big bet on this gut feeling.
In 2022, Bales — along with his business partner, real estate adviser Jason Raible from Telluride — bought the KP Building, a 1909 structure in the heart of downtown Montrose. Over the course of two years, Bales renovated the property, overcoming endless challenges — structural, environmental and more — that come with putting life back into a property and opened The Rathbone Hotel and Parlor Bar last year.
With one project down, Bales and his company, TCB Hospitality, have already purchased a second historic property and plan to open more hotels like The Rathbone in neighboring towns.
"We're actively looking for historic hospitality opportunities in Colorado," Bales said. "We like that with every project, we don't know what it's going to be when we first see it and buy it. And to me, that's the coolest thing."
A new era for an old building
The KP Building has stood on Montrose's main street for more than a hundred years. It was originally built by the Knights of Pythias, a fraternal order founded by Justus H. Rathbone in 1864. In part, the organization was founded to heal the division in the country following the Civil War.
Rathbone was inspired by Irish poet John Banim, who wrote about the friendship between historic Greek figures Damon and Pythias. Sentenced to death by tyrant Dionysius I, Pythias asks to return home to get his affairs in order. Damon vouches for his friend and agrees to take on Pythias' sentence if he doesn't return — which he does just in time to save Damon from death. Dionysius, charmed by their unyielding friendship, lets both men live.
This story inspired the mission and values of the Knights of Pythias — friendship, charity and benevolence. The order built lodges with meeting space for its members across the country, and Bales said the Knights of Pythias were known to construct lasting buildings.
"The Knights of Pythias actually weren't a very successful organization," Bales said of the group. "There's very few of them today even left, so the building didn't last long as [a lodge for] the Knights of Pythias."
The structure has been a market, furniture store and various other shops before a fire broke out in 2012.
"But the Knights were known for building buildings that lasted a lifetime, and that's why it didn't fall down or crumble when the fire happened. It was structurally completely ruined, but it was that thoughtfully done, that it could be saved even after a fire," Bales said.
Ultimately, Bales was inspired by the history of the building and Rathbone's story and charitable work.
"What I wanted to do is to name it and honor the guy who built it to last a lifetime, but maybe didn't have the business acumen to make his business last a lifetime," Bales said.
A 'stubborn' renovation
As strong as the bones of the building were, the construction process — as it is with many historic renovations — was not smooth sailing.
Bales tapped Knott Laboratory, a Colorado-based forensics engineering firm, to take a look at the KP Building to see if it had potential to be restored. While not focused specifically on the hospitality industry, Knott Laboratory was founded by Albert Knott, who served as test engineer in the case investigating the 1981 walkway collapse at the Hyatt Regency in downtown Kansas City.
Scott Hargrove, engineering manager at Knott Laboratory, said his job is to apply the scientific method to solve problems — frequently for trials for incident reconstruction, but also for renovation projects like this.
His first impression of the KP Building was optimistic, and he was very impressed with the more than 100-year-old masonry.
"It was in pretty good shape for a building of that age. It's not uncommon for masonry buildings to end up pretty deteriorated pretty quickly when they're not maintained, just because water and old masonry don't mix very well," Hargrove said.
The biggest challenge would be getting the building up to code and accommodating for a new, hotel-sized load.
"The floor was not in bad shape, but we did have to go in and figure out how to bolster it up, reinforce it so it could take the new loads for a hotel, and that's a pretty sizable increase in loading over what it had seen in the past," he said.
Modern technology played a major role in restoring the building. Rather than just spot check for roof sagging and wall racking, Hargrove was able to tap a 3D scanning tool to evaluate the entire structure. This gave his team a comprehensive evaluation at a fraction of what it would cost to do that manually.
There were, as might be expected, significant foundation issues.
"When we started to uncover that and dug out a little part of the crawl space into more of a basement to use for mechanical space, we found that there are places that just straight up didn't have foundations underneath them," he said. "They were just sitting on the sidewalk or on a slab, so we had to do some repair of those areas."
Another major issue — made manageable by technology — was structural.
"The building we bought was on Cascade Avenue. It's named Cascade Avenue, we found out, because there's a river that flows beneath it," Bales said.
To make the building structurally sound, Bales said they had to install 160 micropiles — long foundational structures drilled down into the ground — from the building to 100 feet below the sub surface, through all of the wet areas.
"There was like only one tool in the western U.S. that could even do such a thing, so we had to wait for that to come out," Bales said.
Delays in finding organic material also accounted for nearly 90 days of construction shutdown, Bales said.
"It was very stubborn," Bales said of the hotel through the construction process. "It felt like we were sort of always fighting against something."
Bales and Hargrove both worked with the historic register associations at the regional, state and national levels to earn historic status for the building. Bales said this added another level of obstacles.
"Historic compliance — they want regular updates, and if they get something in the updates they don't like, they have the ability and wherewithal to shut your project down," he said.
"We're ultimately glad we did it, and we completely honored the building's past," Bales added.
Hargrove said he was working on another project at the same time as his work with the Rathbone — a younger building not as well-constructed — and it was a completely different story.
"For a building that was over 100 years old and had sat vacant for 12 years, it was not in terrible shape. It could have been much, much worse," Hargrove said.
Opening The Rathbone Hotel
Now, the 17-room hotel and first-floor coffee and cocktail concept is open for visitors and Montrose residents alike.
While small — Bales said these sort of boutique hotels are common in the area — the rooms are spacious and well thought out. The Rathbone's northside neighbor is the historic Fox Theater, which means only the south wall of the hotel has windows.
"Despite it being quite a large building, at like 13,000 square feet, we only have 17 rooms because the rooms can only be on the south side of the building," Bales said, "so you have these big, deep, dramatic rooms with almost 12-foot tall really cool, historic arch windows in each room."
Bales said they had to use the size of the rooms to their advantage. With 20-foot ceilings, the suites have separate lofted sleeping areas with first-floor kitchen and living spaces.
"We have everything from 400- to 650-square-foot rooms that are designed for multi-traveler configuration for families," he said.
The first floor of the building houses the Parlor Bar — which serves a full food menu, coffee in the mornings and cocktails in the evenings — and seven guest rooms. The second floor has five additional rooms and five suites.
In the lobby, Bales commissioned a painting of Justus Rathbone in front of Montrose's iconic canyon.
"We just felt like it was this dramatic shot that gives the lobby sort of some life. And then we had a print done of that for every room, and it's signed and labeled whatever room it's in," Bales said.
Montrose on the rise
Bales said he and his wife fell in love with Montrose and saw so much potential for hotel development in it and its surrounding Colorado towns.
"In the hotel world, we're always trying to kind of find that next thing or next market that's going to be really popular. And when I got to Montrose, I saw all these incredible things," said Bales, who previously worked at Stonebridge Hospitality Management and moved to the region in his previous role.
He pointed to not only the commercial and residential growth and potential and charm of the town, but also the fact that it has a well-connected airport.
"I saw an airport that can get you anywhere in the country," he said. "I can live in a town of 20,000 people and fly all over the country direct."
For years, Bales said, Montrose existed as the entry point for ski resort weekends in neighboring Telluride, which is just over an hour's drive away, or Crested Butte, nearly two hours away. But Bales said he saw the potential for Montrose to step up as a destination of its own when he moved there in 2022. Now, he's seeing that vision come to fruition.
"All this kind of created this perfect storm, and Montrose is right at the eye of it," he said, referring to the access to other parts of the country, drive-to ski towns, nearby nature experiences and growing residential communities.
"When I got there, the nicest place you could stay in town was a Holiday Inn," he said. "And now, within one block radius of our project, there's almost $100 million of historic redevelopment for hospitality, tourism and business-related infrastructure."
In addition to growth in tourism, Montrose is seeing commercial and residential growth, too. Bales said the city ranks highly among Colorado's fastest growing cities and has both the small-town charm and commercial access that other resort towns don't. At the end of the day, residents need somewhere to get their oil changed, and Montrose has that, Bales said.
"We're set up for more household growth and [our] commercial district is really supporting all of our sister communities out in the mountains," Bales said. "But downtown, we still have this opportunity with buildings like the Rathbone to preserve history, to improve our tourism capacity and capabilities and to keep adding offerings and amenities for residents and tourists alike — without going out and taking more green space [by] developing buildings that are out of character for the market."
The historic improvements are already happening — first with The Rathbone, but more is coming. Montrose's Main Street, an idyllic and charming area, has boutiques, restaurants, a brewery, coffee shops and more.
"The food-and-beverage scene in Montrose is evolving, and we're really catching up to what the rest of the very culturally diverse kind of art- and F&B-forward area has been doing for a long time," Bales said. "But we were sort of meat and potato town until, I would say, the last year or two."
On to the next
Bales and his company have already celebrated the acquisition of another hotel and dining concept about 30 miles away from The Rathbone. The 1898 St. Elmo Hotel in Ouray, Colorado, is an 11-room bed and breakfast next door to a classic Italian eatery, the Bon Ton Restaurant.
While the St. Elmo was a different project — the hotel has continuously operated for its 127-year history, so it didn't need the same level of reviving — Bales is interested in more major renovation projects for boutique hotels. It's a new era for these types of hotels, especially for travelers looking for more than just a bed and a clean towel. And, thanks to social media and the digital world, smaller hotels can compete.
"We are now in a world where it's way easier to discover these properties," Bales said, explaining that decades ago, travelers had only a phone book or a brochure to use as research so they relied on big brands that offered consistency. "Being the digital world, now people can see what they're booking."
There's also a financial benefit to these types of projects. Hargrove said that in 2024, it cost an average of $425 per square foot to renovate an existing structure compared to $550 per square foot to construct a new building. And, if you have to demolish an existing building before rebuilding your new one, you can add another $150 per square foot to do that.
"There's the economic driver, then there's the historical preservation driver. Cities want to maintain the character they've had for the last 100 or 200 years," Hargrove said. "You have a lot more companies, like Clay's company, that have an interest in really collaborating with the community and ... want to create something cool."