Zephyr, part of the Republic Hospitality chain, has a long-standing tradition of bar staff taking photos of pub-goers who consent to baring their flesh, and pinning up the images.
However, of late, bar staff have taken the practice a step further by encouraging patrons to flash to the camera for free drinks, which has been clamped down on.
Republic Hospitality chief executive Blair Impey said the free-shot-for-a-nude-shot deal was "against our house policy" and he acted immediately to "cut it" after he became aware of it on Tuesday.
"I know obviously there’s photos on the walls, but in terms of ... encouraging it to happen for a free drink, that’s not part of our process.
"That was wrongly executed," Mr Impey said.
"[It was] just a bartender not making the right call there.
"They’ve been told ‘that’s not part of the practice’ because that’s us encouraging people which would make them feel uncomfortable," he said.
Zephyr’s website markets the pub as a place with "plenty of naughty polaroids, you can rock out til you drop out", accompanied by an image of the risque photos displayed in the bar.
"It’s meant to be a bit of fun and not actually encouraged by us.
"It’s just more of a historical thing," he said.
"If they want to do that [get photos taken of their private parts] they can, if they don’t — no worries."
A group of 19-year-old university students who were at Zephyr early on Tuesday morning took offence when offered free drinks to expose themselves.
One of the group, who was not present at the bar, said her friends yelled at the server "this is disgusting, I can’t believe that you’re doing this" before leaving the premises.
"It’s so hurtful that people think that’s OK," the young woman said.
The woman’s father had brought the matter to the attention of Queenstown Lakes District Council alcohol licensing staff.
Council chief licensing inspector Sian Swinney said staff were investigating the allegations and it was inappropriate to comment at this time.
