In 1862 gold was found at Woods Point. Within twelve months the Yarra Track had opened up between Eltham and Woods Point and hotels appeared at staging points along the way. Thomas Muncaster Bell (1821-1902) saw a commercial opportunity and opened the Yarra Flats Hotel in 1864 on the site where Melba Lodge now stands. Other hotels established on the Yarra Track were the Kangaroo Ground Hotel (Edward Weller) in 1864, the Watsons Creek Hotel (William Cleaves) and the Flying Squirrel at Christmas Hills (Robert Lorimer) in 1865. The next one built in Yarra Flats was the Junction Hotel in the early 1870s. It was opposite the cemetery on the corner of the Steels Creek Road.

William Farrell took over the license of the Yarra Flats Hotel in 1881. During the next few years he and his brother Henry foresaw the tourist potential of the railway line when it reached Yarra Flats in 1888. They established a hotel in Bell Street and Henry was the first licensee in 1887. William relinquished the license of the Yarra Flats Hotel and joined his brother at the Burgoyne.  By 1905 the ownership had changed and name of the hotel also changed, and it became The Grand Hotel.