Options for Rural Hotels to Provide Alcohol

By Michael B. Newman Partner, Holland & Knight | December 02, 2018

Imagine you are a small hotel operator in the suburbs of Topeka, Kansas. Your guest gets to their room, unloads their luggage and freshens up and then comes downstairs to the lobby looking for the bar so they can have a relaxing martini, a glass of Pinot Noir, or a hoppy IPA. Unfortunately, the guest is told "we are sorry but we don't have a bar here." And the guest responds, "what kind of hotel are you that doesn't have a bar."

Many hotels in smaller cities, rural areas, or suburbs share this predicament. You don't have enough regular patrons to justify operating a full service bar or the cost of getting a full bar alcohol beverage license (or even a beer and wine license) is prohibitive. Are there other legal options available?

In the hotel industry, a key amenity at many hotel properties is the hotel's restaurant and bar. But the service, sale, and consumption of alcohol beverages on the hotel's premises necessitates some type of on-premises retail license issued by a state and/or a local alcohol beverage licensing authority. There may even be a special retail license specifically available to hotel properties. A hotel requires a variety of on-premises consumption privileges, including the sale of alcohol beverages through in-room honor bars, room service, and at other sales locations within the hotel such as a hotel restaurant or hotel bar.

The regulation and licensing of alcohol beverage service at hotels varies significantly on a state by state basis (and can even be subject to varying local licensing ordinances and municipality or county regulations). This is the result of the 21st Amendment repealing Prohibition that left most of alcohol beverage regulation to the discretion of the individual states.

But not every hotel is set up or can afford this amenity. The more tried and true option of course for a hotel that chooses not to have a bar is the in-room honor bar or the "mini bar." At one time most of the states prohibited mini bars, but that has changed significantly over time although there remain some hold-outs including Kansas, Montana, New Hampshire, Utah, and West Virginia. Some states generally allow the mini bar pursuant to an overall on-premise retail alcohol beverage license just as they would allow room service. It is merely considered self-service room service.

Others authorize mini bars expressly by statute. For example, in California, a mini bar is authorized under the California Alcoholic Beverage Control Act as a "controlled access alcoholic beverage cabinet." The law authorizes the sale of alcoholic beverages by a hotel or motel, defining the cabinet as "a closed container, either refrigerated, in whole or in part, or non-refrigerated, and access to the interior of which is (1) restricted by means of a locking device which requires the use of a key, magnetic card, or similar device, or (2) controlled at all times by the licensee." Business & Professions Code §23355.2.  

The law only authorizes a mini bar cabinet when certain conditions are met including: (1) access is limited to furnishing a key, magnetic card, or similar device, or otherwise, only to an adult registered guest; (2) prior to providing such device, the holder of the license must verify that the registered guest is not a minor; (3) distilled spirits are only stocked in the mini bar in containers of 50 milliliters or less; (4) all employees handling the alcoholic beverages to be placed in the mini bars in the hotel, i.e., inventorying or restocking and replenishing them must be at least 21 years of age; and (5) there is no replenishing or restocking of the alcoholic beverages between the hours of 2 a.m. and 6 a.m. (Of course, there's nothing in the law that prevents a guest from pulling out a beer or a miniature whiskey bottle at 3 in the morning!)

Arizona has adopted the virtually identical mini bar licensing law but allows employees who do inventories or restocks and replenishes of the minibar to be at least nineteen years of age. Arizona Revised Statutes § 4-205.06. 

Another option for alcohol beverage service that is allowed, at least expressly, in a number of states today is self-service. Here again, states (and state regulators) have varying views of the legality of any self-service device in a retail establishment which is unattended by a hotel employee through which a hotel guest could be sold and served alcohol beverages.

Louisiana regulations expressly allow the sale and service of alcoholic beverages in a retail establishment through an unattended or self-service mechanical device as long as the purchaser submits to a clerk valid identification. Regulations, LAC 55:VII.305-D.  

Missouri law authorizes a self-dispensing system for beer and wine which is monitored and controlled by an on-premise licensee and allows patrons of the licensee to self-dispense beer or wine. Before a patron may dispense beer or wine, an employee of the licensee must first authorize an amount of beer or wine not to exceed thirty-two ounces of beer or sixteen ounces of wine per patron per authorization to be dispensed by the self-dispensing system.  However, there is no similar provision under Missouri law for distilled spirits. Missouri law also expressly prohibits any wholesaler, distributor, or manufacturer of alcohol beverages to furnish self-dispensing or cooling equipment or provide services for the maintenance, sanitation, or repair of self-dispensing systems. Revised Statutes of Missouri 311.205-2. 

The State of New York, in response to "Declaratory Ruling" requests submitted to its State Liquor Authority, has authorized several self-service operations for alcohol beverages. The New York State Liquor Authority has allowed a consumer-interactive "beer wall" whereby the consumer uses a wrist band fitted with a computer chip to activate self-service. The beer wall is also monitored by an employee to ensure that no customers are over-served and that no minors are using the beer wall.) State Liquor Authority Declaratory Ruling 2013-01899.  New York has also permitted a vending machine fitted with original-labeled bottles. State Liquor Authority Declaratory Ruling 2013-01358.  

Finally, New York has also allowed an automated dispensing machine for wine. State Liquor Authority Declaratory Ruling 2014-01166E.  In each of the Declaratory Rulings, the State's approvals were conditioned upon operational safeguards to ensure that sales to minors or intoxicated patrons do not occur including having persons conducting age verification in advance of self-service.

The California Department of Alcoholic Beverage Control, as a matter of Department policy, will permit the use of self-service alcohol beverage systems but does caution its alcohol beverage licensees regarding the use of such a system. According to the Department's 2009 Trade Enforcement Information Guide, "the sale or furnishing of alcoholic beverages by the use of vending machines or self-service is usually problematic." In practice, the Department has authorized the installation of automated vending units for beer in food court locations they operate under alcohol beverage licenses at California airports.

In 2015, the Department did approve these self-service units with the conditions that (1) customers requesting the beer would be carded at the cash register to verify adult age and (2) limits were placed on how much beer the customer could purchase (up to two glasses of beer in total) and how often the customer could purchase the beer (one beer per hour).

From discussions with the Department, it was clear that a self-service format would be more likely to attract the Department's attention from an enforcement standpoint to ensure that the system does not result in over-service or youth access and that there are adequate operational safeguards to avoid self-service and consumption of alcoholic beverages by minors or intoxicated patrons. The Department does want to see that its licensees remain responsible for monitoring the consumption level of customers to ensure the customer is not over served to the point of obvious intoxication.

The Department, similar to what is expressly stated above in the Missouri law, also cautioned against incorporating alcoholic beverage supplier paid advertising on the systems or any underwriting of the costs of the systems by alcoholic beverage suppliers through payments to place beer advertising on the units.

There is also precedent in Virginia for self-service in the case of an alcohol beverage-licensed air carrier who wishes to permit the self-service of wine or champagne within a designated room (its special lounge) at the airport. In this case, the lounge was only accessible to selected passengers, by invitation, with a check-in protocol. The Virginia Department of Alcoholic Beverage Control determined that while a representative of the airline did not have to serve the wine or champagne, the wine or champagne consumption had to be observed by an employee of the airline.

Then there at least a couple of states that appear to have laws or regulations prohibiting any kind of self-service alcohol beverage systems.

Georgia regulations expressly prohibits a retail licensee from selling any alcohol beverages through any "vending machine" or "unattended machine." Georgia Comp. R. & Regs. R. 560-2-2-.24.  

Texas law gives rise to significant doubt about the legality of self-service of alcohol beverages in Texas although the door does not necessarily appear to be nailed shut. Texas law provides that "nothing in this chapter shall be construed as authorizing nor may the commission or administrator authorize the sale of any alcoholic beverage from a coin-operated machine or similar device operated by the consumer." Texas Alcoholic Beverage Code §51.09. https://www.tabc.state.tx.us/laws/code/85th/AllTitles.pdf.

Another option for alcohol beverage service that is available at least in California is the "complimentary" furnishing of alcohol beverages to guests and/or the sale of beer and wine in sealed containers to a hotel's guests. For these purposes, the State of California will issue an on–sale license for "restricted service lodging establishments." The service (e.g., the manager's wine tasting) is available to hotels and motels when the cost of the alcoholic beverages is included in the price of the hotel room, whether or not separately stated. A hotel or motel can qualify for this special license if: (1) it does not operate a restaurant with an alcohol beverage license; (2) it has at least 10 guestroom accommodations; and (3) it does not derive more than 5 percent of its total gross annual revenues from sales of alcoholic beverages.

The hotel or motel can sell beer and wine in sealed containers to a hotel's guests if it has a "food sale area" in which it sells items such as prepackaged sandwiches, salads, snacks, candy, dairy products, water, soft drinks, and other nonalcoholic beverages or similar food items. What is not particularly attractive about this license, however, might be the cost. The State charges an annual fee of $6,000. Business & Professions Code §23396.1.  

So, in sum, there are options available to those hotels or motels that elect not to have the hotel bar for their guests. But whether any one of these options, be it the mini bar, the self-service system, the complimentary service of alcohol beverages, or any other option available other than a bar is going to be subject to whatever state alcohol beverage laws allow or whatever state alcohol beverage regulators, in their discretion, believe they can allow.

Mr. Newman Michael B. Newman is a partner in Holland & Knight's San Francisco office and serves as head of the firm's Alcohol Beverage Team, Mr. Newman focuses on counseling industry clients on national and international regulatory, contract, legislative and licensing matters, advertising and promotional law, intellectual property rights, importation matters, trade practices, and inter-tier relations. He represents clients on matters before the federal Alcohol & Tobacco Tax & Trade Bureau, the California Department of Alcoholic Beverage Control and State Board of Equalization, and other state alcohol beverage agencies throughout the United States. Mr. Newman has experience representing all three tiers of the alcohol beverage industry. He works with international importers, suppliers, exporters, domestic manufacturers, regional and local distributors, and retailers (including multi-state restaurant and hotel and convenience store and other off-premise chains) across the United States. Mr. Newman can be contacted at 415-743-6989 or michael.newman@hklaw.com Please visit http://www.hklaw.com for more information. Extended Biography

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