A Bahraini official has threatened to crack down on hotels that get around the liquor laws by "cheating" the system.
Some hotels have turned their ballrooms into five-star restaurants to take advantage of the liquor permits granted to the latter.
But Islamist parliament member, Sheikh Ibrahim Al-Hadi, has dubbed this "cheating" and threatened to launch a campaign against "those who want to corrupt the country."
Four months ago, Bahrain banned hotels -- with the exception of five-star establishments -- from hosting parties or serving alcohol in an effort to promote its "Clean Tourism" initiative.
The decision, according to one expert, has driven some tourists and investors to nearby Dubai, a UAE emirate, which has more liberal liquor and entertainment laws.
The head of Bahrain's hotel association said profits of some establishments have fallen drastically while other hotels are swarming with people until 4 a.m.
"Hotels are not treated equally," said Ahmed Sanad, head of the Bahraini Association for Hotel and Restaurant Owners.
Although Bahrain risks losing tourism revenue to Dubai, the Ministry of Mass Communication says it is sticking to its "Clean Tourism" program.
MP Al-Hadi told Al-Arabiya.net that Bahraini prosecutors had shut down a hotel two weeks ago for alleged involvement in prostitution, and said that other investigations are currently underway.
Violations of Bahrain's entertainment laws are punishable by jail time, fines, and deportation for foreigners.