Maybe the hotel owner did more than threaten to call the police?
I'd probably call the consulate (and get the hell out of the country too) if the police removed me from a hotel!
IMHO, the OP is an entitled hothead. However, it's simply wrong to take payment from him and then deny him service. It seems that most here that think the hotel has a right to refuse service neglect to mention the property acceppted payment in advance. Further, the OP was left with unexpected costs so merely refunding the payment isn't sufficient.
I'm glad the OP stayed on the island. After 20 years of marriage, I'm sure his wife needs a vacation
. I don't think I'm the only one who would be shocked if this is the OP's only confrontation.
Btw- I'd really like a lurker to chime in with an SPA policy on denial of service. When is it ok?