Even before Monroe M. Shipe developed Hyde Park as one of Austin's first suburbs, the area was well known as a center for recreation. The flat, smooth terrain made it an ideal site for racing horses, and the Capital Jockey Club racecourse, located in the southeast corner of the area, was called "the finest in the South." The state militia also took advantage of the expanse of flat land to hold drills and sham battles at its annual summer encampment which attracted thousands of spectators. In 1875 the Capital State Fair Association located the state fairgrounds adjacent to the racetrack, constructing a 3,500 seat grandstand, a large exhibition hall, stables, cisterns and wells to accommodate visitors to the fair. Initially successful, the fair began to lose money and relocated to Dallas in 1884.

Following the beautification of the grounds of the State Lunatic Asylum in the 1870s, young ladies and their beaux often strolled by its lakes and took buggy rides on its scenic drives on Sunday afternoons. With the development of Gem Lake across Guadalupe, the area became well established as a resort, and the completion of a pavilion by the lake provided a popular location for concerts, plays, musicals, dances, and other entertainment.