From Timothy Guilfoyle A Pickpocket's Tale

Origins of the term 'dive' are difficult to pinpoint. Mid-nineteenth-century New Yorkers apparently employed the word to describe disreputable drinking establishments located in basements, thereby requiring patrons to figuratively "dive" into them to escape public view. One reporter defined a dive as "a place that is low down, beneath the street level, and is devoted to drinking or dancing." By the 1880s, however, many accepted police detective Thomas Byrnes's assumption that a dive was an unlicensed leisure establishment: a house of prostitution, gambling den, policy office, or opium den.