Twelve-year-old Milo Pine lives in a large inn called Greenglass House with his adoptive parents Nora and Ben Pine. The house sits atop a steep incline called Whilforber Hill nestled in an inlet of the Skidwrack River in Nagspeake. The house serves as an inn for smugglers and is not easily accessible. Only the cook and the family use the road entrance, and no one uses the staircase, which consists of over 300 steps. Most visitors arrive by boat and use the cable railway car, named Whilforber Whirlwind, which the Pines raise via a large winch. Milo explains the unorthodoxies of running an inn for smugglers, which requires a tolerance for strange, mysterious behavior from the guests, including how they pay. Milo notes that they do have guests who are not smugglers, and they have regulars who come at certain times.

It is winter break, and the town is covered in snow, so the Pines are not expecting guests, but one evening the bell on the harbor landing porch begins to ring, signaling a guest has arrived. Milo is annoyed at the surprise arrival as he is looking forward to a quiet holiday break. He admits that he despises a change in plans.