Habbo stemmed from a 1999 hobby project by creative designer Sampo Karjalainen and technologist Aapo Kyrölä called Mobiles Disco for a Finnish band, a virtual chat room running on Aapo's Fuse technology. After having been contracted to design a virtual game and chat called Lumisota (Snow Wars) for a Finnish ISP, Elisa, they were contracted for another project. They developed Hotelli Kultakala (eng. Hotel Goldfish) with a small team of developers and it was launched in August 2000 on the ISP's web portal.
Aapo and Sampo and Dee Edwards, an entrepreneur from the UK, wanted to create an international business based on the virtual hotel concept and worked on a plan in autumn 2000 and raised finance. By the end January 2001, Habbo Hotel had been launched in beta mode. The new hotel launched officially a few weeks afterwards, aimed at the teenage market, with marketing and payment partners in place, run from a HQ in London. It had a new credits system and community and safety features. The next hotel was launched in Switzerland a few months later, in four languages. It has since been expanded to over 31 countries in five continents, including Hotelli Kultakala in Finland which was made into a Habbo Hotel and has been invested in by venture capitalists.
In May 2006, the service, along with its domain names, were changed from www.habbohotel.com (.co.uk, .com.au, etc.) to www.habbo.com (.co.uk, .com.au, etc.). In August 2007, Habbo's Chinese community closed down temporarily, the first time a Habbo website has closed. The challenging Chinese market and high operational costs led to the decision of closing the service. Customers in China were redirected to other Habbo communities. In December 2008, Habbo's Russian community announced it was closing in February 2009 as a result of low numbers. Those on the site with "furni" (virtual furniture that can be used to furnish rooms in the hotel that are bought with the use of Habbo Credits or Coins, that can be exchanged for real money given to Sulake) have been told they will receive credit codes for use on the USA Habbo community.
In late May 2009, Habbo opened a new beta version of Habbo for some Habbos to test out before using it officially. In the new version of Habbo, the client uses Flash instead of Shockwave, and the interface of the Hotel is changed.
In January 2010, it was announced that Habbo US and Habbo Canada were undergoing a merger, to be finalized in April 2010. However, in April 2010, it was announced that all English-speaking hotels will be merged as one. On May 5, the merger for Habbo US and Habbo Canada was complete. On June 2, the Australian site merge was completed. The Singapore site was officially merged on June 4. On June 10, the final Hotel was merged Habbo UK and that completed the set, making Habbo.com the only English site.