The hotel was founded in 1844 by Mikhail Vasilyev, a native of Riga, who left Russia in 1840 to avoid military service. He ended up on the ship of Captain Vurshmidt, heading to Stavern. In 1841, Mikhail married Anna Mari Jakobsdatter, the owner of a waterfront farm, who was two years younger than him. Mikhail converted the farmhouse into a bakery and hotel, and also established a steamship company.

His son, Ingebrigt Vasiliiff, an engineer by education, took over the management of the hotel in 1867 and made it more well-known. His sister, Tatiana Vasiliiff, worked as the head chef. In 1878, the hotel received three stars in the Baedeker guide, which was the equivalent of the modern Michelin guide and covered Norway and Sweden. This was the highest award given to only two hotels in Norway: the Chistiania hotel in Christiania and the Wassilioff hotel in Stavern. Despite the deaths of the Vasilyev family in 1898 and 1905, the hotel continued to be popular throughout the 20th century and still is today.

After Ingebrigt's death in 1905, the steamship company was managed by Peder Pedersen, while the hotel passed to Miss Marie Steinert from Larvik. Subsequently, the owners became Johan Fridmann Jensen, and then Gerd Johansen, who sold the hotel in 1967 to the couple Anne Gerd and Gunnar Lossius Berset.