The festival first began in 1980 during a period of crisis. The province relied on sugar cane as its primary agricultural crop, and the price of sugar was at an all-time low due to the introduction of sugar substitutes like high fructose corn syrup in the United States. It was also a time of tragedy; on April 22 of that year, the inter-island vessel Don Juan carrying many Negrenses, including those belonging to prominent families in Bacolod City, collided with the tanker Tacloban City and sank. An estimated 700 lives were lost in the tragedy.
In the midst of these tragic events, the city's artists, local government and civic groups decided to hold a festival of smiles, because the city at that time was also known as the City of Smiles. They reasoned that a festival was also a good opportunity to pull the residents out of the pervasive gloomy atmosphere. The initial festival was therefore, a declaration by the people of the city that no matter how tough and bad the times were, Bacolod City is going to pull through, survive, and in the end, triumph.