More Ghost Stories from Cripple Creek, Colorado: The Ghost of the Palace Hotel

c 2022 by Jan MacKell Collins

Portions of this article originally appeared in the Colorado Gambler.

For years, the prominent Palace Hotel at the intersection of Bennett Avenue and Second Street has been an important piece of Cripple Creek history, and folklore. For over 50 years, the Palace has been said to be haunted by the apparition of Kitty Chambers. The lady’s appealing form has appeared to visitors and owners alike for decades. Both legend and rumor have combined with a bit of fact to make Kitty the ethereal epitome of romance. But is Kitty really the soulful, ghostly woman who can be seen waving a genteel hand from the upper floors of the Palace, especially late at night?

The story of the Palace begins in 1893, when Dr. William J. Chambers leased offices at what was first known as the Palace Drugstore. The drugstore was one of a chain of businesses bearing the name of the Palace, and was affiliated at that time with Cripple Creek’s original Palace Hotel directly across the street. In 1893, the Palace Drugstore was a two-story wood building, housing a pharmacy on the first floor. Local physicians, including Dr. Chambers, leased offices on the second floor. A man of considerable wealth and reputation, Chambers and his first wife, Ellen, quickly became well-known in Cripple Creek’s upper-class society. Newspapers mentioned the couple often for the next several years.

Following the devastating Cripple Creek fires which burned the Palace and most of the downtown area in 1896, the new Palace Block was built of solid brick and towered three stories high. The all-new Palace Pharmacy re-opened on the first floor, and rooms were rented on the third floor. Dr. Chambers leased suites 1-3 of the Palace Block, on the second floor. But if the good doctor’s business was booming again, his personal life was not. In 1899, Ellen L. Chambers  divorced William J. Chambers and disappeared. 

Dr. Chambers recovered from his divorce quite nicely. Just three months after the divorce was final, the January 25, 1900 edition of the Colorado Springs Gazette reported that Dr. W.J. Chambers had gone to New York to marry a Miss Catharine Howard. “Miss Howard is a very esteemable young lady who was employed as clerk and stenographer for O.E. Yeak, the insurance man, up to a short time ago when she resigned her position and went east,” the newspaper explained.   

Catharine Howard Chambers, whose name is host to a variety of spellings in court records, was as resilient as her new husband. Together, she and William purchased the Palace Block in its entirety just a short time after their marriage. Catherine was well liked and accepted by Cripple Creek society, and became known by her playful nickname, Kitty. But the Chambers were not destined to remain in Cripple Creek, nor was their marriage a happy one. The couple moved to Los Angeles and are believed to have been divorced by 1902. Kitty was able to retain her half interest in the Palace Block, which she sold to her ex-husband in 1910.

Contrary to local legend, Kitty remained in California and died in 1908. There is no evidence she ever returned to Cripple Creek, nor is there anything to support the idea that she enjoyed living in the raw, frontier town. Yet somehow, the ghost of Kitty Chambers is identified as the ethereal woman who haunts the Palace to this day. They say she died, in Room 3, in 1918. But historic fact has made the possibility of Kitty’s spiritual existence less and less plausible.  Who then, is the ghost of the Palace Hotel?

 Historians say that folklore often evolves around true stories, elaborated upon with time. The death of a woman at the Palace in 1918  probably happened. If that tale is true, the real ghost could be Mrs. Mary B. Hedges, a Teller County clerk who resided in and managed the furnished rooms on the third floor of the Palace beginning in 1912.  She stayed at the Palace until 1918, when her name disappears from city directories.  Was Mary Hedges enticed to abandon her comfortable station by death? The answer, at this time, is unknown.

What is known is that, after Mary Hedges’ disappearance, the Palace Block continued to offer furnished rooms. But by the 1920’s, Cripple Creek was in the beginning throes of a slow death.  Mines were playing out and people were moving away. The pharmacy continued to operate while the upper stories of the stately Palace Block slowly fell to disuse. Dr. Chambers, who had retained his ownership all this time, finally sold the building in 1928. A succession of owners followed, including Gertrude Coffin and her sister-in-law, Maude Playford, who purchased the Palace in 1941. The former Palace Pharmacy moved across the street to the Bi-Metallic Building, while Gertrude and Maude opened “The Girls’ Cafe” on the first floor (on a couple of side notes, Gertrude Coffin Diehl was the great-aunt of famed musician Stevie Nicks. She and Maude, certain folks say, ran a brothel of sorts from the Palace and other places during the 1940s).

In 1945, Gertrude and Maude sold the Palace Block. A bar opened on the bottom floor, while renters continued living in the upstairs rooms. One of them was Vitus M. Neelson, a blind man who played piano and was one of Cripple Creek’s many colorful characters during this era – 1952, when he apparently tripped and was found dead at the bottom of the stairs. While Vitus Neelson’s body rests in Mt. Pisgah Cemetery, his after-life aura is said to haunt the Palace to this day.

Vitus apparently lived alone during his time at the Palace, or at the very least, the other lodgers moved out after he died; old-timers of Cripple Creek would remember the building being boarded up for a few years before it was sold in 1956 for back taxes and eventually returned as one of three prominent watering holes in town. Then, in 1976, Robert and Martha Lays purchased the building and moved in with their five children, and reopened the Palace as a hotel. Among other things, the Lays were told there were ghosts in the building.  One was a female, presumed to be a former owner of the hotel.   

The Lays immediately saw why the Palace was said to be haunted. Mysterious lights played a large part in the ethereal activities around the Palace. Lights were seen in Room 3 when the power was off. A retired couple who was hired to care for the hotel resigned after several incidents involving the light in Room 3. The bed covers in that room were occasionally turned down by an unseen hand, and a family friend of the Lays reported seeing the apparition of a woman standing in the window up there when the hotel was empty. Other residents and even a former Cripple Creek sheriff saw her as well. Hastily-conducted research brought forth the name of Kitty Chambers, and that is what the ghost was so-named.

Although members of the Lays family lived in the hotel, it was not until 1983 that any of them experienced the ghost, who chose her victim carefully. The Lays’ son, Bob, was alone in the hotel one night, cleaning on the third floor.  “We’d closed for the season,” he related in a 1996 interview, “and I was the only one in the whole state to have a key.  Around 5:45 p.m., I walked down to the dining room and there was a lit candle on one of the tables.” For the first time in Bob Lays’ practical life, there was no rational explanation for what he saw.

The irrational activities at the Palace were just beginning. Late one night, out of the corner of his eye, Bob spotted a woman moving through the lobby. She had straight, dark hair. A long white nightgown with long puffy sleeves and a lace-neck collar graced her figure. It was hard to see any facial features, but Bob got the impression the woman was in her mid-30’s. She was definitely not one of the four guests who had checked in that night. Bob said she seemed to be heading out the front door or up the stairs, both of which unusually gave forth an audible creak. Yet no noise came forth. “It startled me,” Bob said. “It was a couple minutes I stood and listened.” But there was no sound.

After that, lighted candles were found two to three times a week in the dining room by various family members. The candles appeared only on specific tables and seemed to follow a cycle as to when and which one would light by itself. For a time, the candles patterned themselves in a circle around the room. The electric lights also played havoc, coming on at odd times by themselves, in front of different witnesses.

In about 1985, the Lays moved the Palace bar into a vaudeville theater which had been constructed in the building sometime in the late 1960’s. Once, while closing the theater, Bob noticed a light at the bar and found a lit candle sitting on the beer cooler. On another night, Bob returned from a much-deserved late evening out. Entering the Palace’s front door, he found another lit candle waiting for him in the dining room. “I like to think she did that one just for me,” he said with a smile. After a time, he also got in the habit of saying goodnight to Kitty before blowing out the candles and retiring for the night.

Once news leaked out about ghost at the Palace Hotel, curiosity seekers besieged the building. They ranged from historians to reporters to psychics. The latter claimed there were three spirits altogether: the mysterious young woman, the ghost of Vitus Neelson, a nameless young boy. The lady, of course, remains the most intriguing since various visitors who saw her offered up almost identical descriptions of her in her white gown. One couple claimed that their shower water unaccountably shut off, shortly after they discussed the ghosts known to haunt the hotel.  

In the 1996 interview, Bob Lays said that he last heard from his ghost in about 1989. He wasn’t sure why. Even after the city of Cripple Creek legalized gaming in 1991, the spirits of the Palace remained unseen as the hotel was remodeled and the first floor evolved into a casino, bar and restaurant. In spite of their silence, Bob said he still found himself speaking to the invisible lady aloud now and then. The idea of Mary Hedges, instead of Kitty Chambers, haunting the Palace intrigued him. “No wonder she wouldn’t answer me,” he muttered thoughtfully.

It has been some years since Century Casinos, which owns the buildings adjacent to the Palace, purchased the building from the Lays family. Plans have been made on several occasions to install offices in the building or, most recently, turn it into a boutique hotel. At least fears that the historic building would be torn down have been alleviated, for now. But the Palace remains vacant, save for the occasional paranormal investigation. One day, the building will hopefully reopen and a whole new generation can experience the spirits who linger there still. Odds are, they can wait.

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