Contrary to popular belief, the current hotel structure wasn't built in the late 1890s gold rush, because great fires, storms and flooding have weathered away any previous buildings. The current structure was built in the early 1980s, conforming to city building codes of gold rush boomtown style catering to modern tourism. 
The hotel has gained notoriety for its Sourtoe cocktail. The Sourtoe cocktail began during prohibition with a case of frostbite. In the 1920s, two outlaw brothers, Louie and Otto, were caught in a blizzard. Louie soaked his foot, and when the brothers got back to their cabin, Louie's foot was frostbitten with his right toe becoming gangrenous. Otto amputated it, and placed it in a jar filled with bourbon to commemorate the event. The drink tradition was established by riverboat captain Dick Stevenson in 1973 (c. 1930 - 21 November 2019).
To gain admittance to a club of drinkers of the Sourtoe cocktail, members must drink the cocktail and the lips of the participant must touch the toe, and gets presented with a signed certificate but ingesting the toe results in a $2,500 fine and permanent barring from the premises, up from $500 from when guest; "Josh from New Orleans" deliberately ingested it in 2013, proactively paying the fine and unremorsefully shocking the bartender.  Over 100,000 customers have tried the concoction to date, as of 2023. Bartender Terry Lee says they would like to have another toe donated, because several toes have been damaged, stolen, swallowed or lost over the span of decades.
- Ann Carroll Burgess; Tom Burgess (2005). Guide to Western Canada. Globe Pequot Press. p. 281. ISBN 978-0-7627-2987-6.[permanent dead link]
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- "Dawson City Heritage Management Plan". cityofdawson.com. March 2008. Retrieved July 9, 2023.
- "THE HISTORY OF THE SOURTOE COCKTAIL: A SHOT OF WHISKEY GARNISHED WITH A HUMAN TOE". Cbc.ca. Retrieved 18 July 2019.
- "Captain Dick Stevenson, inventor of Yukon's infamous 'Sourtoe Cocktail,' has died | CBC News".
- "Yukon bar patron swallows famous sourtoe, pays fine, leaves town". Toronto Star. Retrieved July 9, 2023.
- "Dawson City and the Sourtoe Cocktail". calibremag.com.
- "Sourdough Saloon | Downtown Hotel". Downtown.ca.
- "Customer swallows human toe in Dawson City bar". Cbc.ca. Retrieved 18 July 2019.