When [Henry] Flagler first visited Florida in 1878, he recognized the state's potential for growth but noticed a lack of hotel facilities. Flagler returned to Florida and in 1885 with an eye toward developing the area around St. Augustine and began building a grand hotel, the Hotel Ponce de Leon. Flagler realized that the key to developing Florida was a solid transportation system and consequently purchased the Jacksonville, St. Augustine & Halifax Railroad. He also noticed that a major problem facing the existing Florida railway systems was that each operated on different gauge systems, making interconnection impossible. Shortly after purchasing the Jacksonville, St. Augustine & Halifax Railroad, he converted the line to standard gauge.
The Jacksonville, St. Augustine & Halifax Railroad served the northeastern portion of the state and was the first railroad in what would eventually become the Florida East Coast Railway Company. In addition to improving the railroad, Flagler built schools, a hospital and churches in St. Augustine, systematically revitalizing the largely abandoned historic city.
Flagler soon purchased three more railroads: the St. John's Railway, the St. Augustine and Palatka Railway, and the St. Johns and Halifax Railroad so that he could provide extended rail service on standard gauge tracks. With the addition of these three railroads, by spring 1889 Flagler's system offered service from Jacksonville to Daytona. Continuing to develop hotel facilities to entice northern tourists to visit Florida, Flagler bought and expanded the Hotel Ormond, located along the railroad's route north of Daytona.