It took the directors a very long time to discover that a combination of shop and hotel keeping was not a paying proposition although they had had plenty of convincing evidence year after year of the fact. I forget now at what period it suddenly dawned upon their minds the necessity of making a thoroughly drastic change and altering their whole policy; nor do I know to whom was due the credit of this _volte face_, but whoever it was he most certainly earned the lasting gratitude of the shareholders as well as every one else connected with the concern, as by his action he converted a chronic non-paying affair into a thriving and ever-increasingly prosperous one. When they abolished the shops they devoted their energies to developing the place into a first-class hotel which it certainly never had been before, and proceeded to increase materially the residential accommodation. They erected a third storey, and built an extra corridor on the first floor and two on the second, installed an enlarged and improved system of sanitary arrangements, and added a bathroom to very many of the bedrooms. The walls were embellished with dados of bright coloured tiles and the floors paved with black and white marble. The old antiquated doors were removed to give place to others of the latest design with polished brass handles and fittings. Several alterations and improvements were also inaugurated in the public apartments. There used to be a billiard table in the room oft the Mr. g-room in the north-west corner, and the two others adjoining were utilised as lounges. The space now occupied by the new dining-room overlooking Waterloo Street was, as far as I can remember, taken up by private suites. The palm court was built on the roof of the first floor and was a very great improvement to this part of the hotel as it removed from sight what had always been a blot and an eyesore. After the abolition of the shops, tiffin-rooms were established on the Waterloo Street side, which have since been converted into a spacious billiard saloon. [Illustration: The Old Royal Exchange.] [Illustration: _Photo. by Johnston & Hoffmann._ The New Royal Exchange]