According to The New York Times, Watch Hill was historically home to "a select group of wealthy families", whose lives revolved around "golf and tennis at the Misquamicut Club, bathing and yachting at the Watch Hill Yacht Club and tea and cocktails at Ocean House and Watch Hill's other grand hotels." Wealthy families built sprawling Victorian-style "cottages" along the peninsula. The village was known as "a somewhat staid and family-oriented community compared to glittering Newport, Rhode Island's other, more famous summer colony." Famous guests to the seaside resort included Albert Einstein, Douglas Fairbanks, Douglas Fairbanks, Jr., Groucho Marx, David Niven and Jean Harlow. The writer Stephen Birmingham described Watch Hill as "an Andorra of Victoriana on the New England shore."

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In the 1980s and 1990s, many of Watch Hill's expensive Victorian mansions were sold. They had been owned by the same families for generations but there was no longer sufficient cash flow to maintain the sprawling properties. The vibrant real estate market opened up the area to a new class of buyers who found Watch Hill "affordable compared with the Hamptons". These new occupiers are considered "more cosmopolitan than the families of old and less dependent on the private clubs for their social scene". Today, Bay Street in Watch Hill is lined with shops, restaurants, and businesses. East Beach and Napatree Point are the main beaches in the village. The community is a secluded and seasonal resort community with shopping, a golf and beach club, yacht club and beautiful public and private beaches.

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The New York Times notes that "Watch Hill impresses visitors with a strong sense of privacy and of discreetly used wealth - the rambling, old-fashioned, turreted and gingerbreaded Victorian summer houses with piazzas and softly rolling lawns have little in common with the overpowering castles of the very rich in Newport, a place rarely mentioned in Watch Hill even though it is barely 30 miles distant."

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The waterfront was once lined with huge Victorian hotels. However, fire and hurricanes destroyed almost all during the 20th century. The two remaining hotels, The Ocean House and the Watch Hill Inn, went through major renovations during the 2000s. The Ocean House was originally opened in 1868, torn down in 2005, rebuilt and reopened in 2010. This Ocean House today consists of both hotel rooms and condominiums. It is the only Forbes Five-Star and AAA Five Diamond Hotel in Rhode Island and has been described by The New York Times as a place which "conjures up another age, when women wore white gloves to tea and golf was a newfangled pastime." Celebrities including Hugh Jackman and Regis Philbin have holidayed at the hotel.