Designed to compete with hotels by 'offering all the ordinary advantages of those establishments without the allurements of the drink', the coffee house movement originated in Scotland in the 1830s under the auspices of temperance societies and spread to Melbourne where the first such society was formed in 1837.
Much of the success of the coffee palace movement was due to men like James Munro, politician, property tycoon and temperance leader. Melbourne needed new hotels and Munro was responsible for building many of the coffee palaces, including the Victoria in Collins Street (1880) and the Federal Coffee Palace (1888). After establishing the company that took over the Grand Hotel in 1886, Munro renamed it the Grand Coffee Palace and ceremoniously burnt its liquor licence at the official opening. Munro was director of the Grand, the Victoria and the Federal and held thousands of shares in these coffee palaces as well as those in Geelong and Broken Hill. Coffee palaces also spread to the suburbs and country towns, although they were nowhere near as large or ornate as those in Melbourne. By 1888 there were more than 50 coffee palaces in Melbourne alone.
Opened in 1888, the Federal was one of the largest hotels in Australia. Designed in the French Renaissance style, the façade was embellished with statues, griffins and Venus in a chariot drawn by four sea-horses. The interior comprised chess, billiard, reading, smoking, writing and sitting rooms, 400 bedrooms, six 'accident proof' lifts, gas lighting, electric service bells and an ice-making plant. It was no wonder that it was favoured over the mere 200 bedrooms at the Melbourne Coffee Palace in Bourke Street and the rooftop promenade at Queen's Coffee Palace in Carlton.
By the early 1890s, many coffee palaces were in financial trouble. Leading figures in the temperance movement were also involved in land speculation and building societies and when these schemes collapsed, many, including Munro, were ruined. The Grand was granted a liquor licence in 1897 and its name reverted to the Grand Hotel. In 1920 the hotel reopened as the Windsor. The Federal also applied for a licence and traded as the Federal Hotel until demolition in 1973. Opened in 1880, the Victoria finally succumbed to a liquor licence in 1967.