Turn to your left and kill the V-Head Junkie and collect his ammo. Now walk through the door, turn right, and kill the four thugs you see; the last will fall down in slow-motion. Walk into Muerte's room (313) and quickly roll out the way, because Muerte rigged his room to blast a shotgun round at you when the door opens. If you don't dodge the shell, you'll either take a large amount of damage or even die if you're playing on the most difficult level.
Take his gun and open the package on his bed, where you'll find a Sawed-Off Shotgun. You'll also find some more ammo and painkillers in his room as well. A cutscene will activate when Max finds a letter from The Don telling Muerte to broker the drug deal, but Max will dispose of the evidence. The next part of the level is optional, but useful. Turn right and break through the damaged wall, walk outside onto the ledge of the building, and then break through the damaged wall on the other side of the hotel. You'll find a dead thug with a sign on his back and several molotov cocktails and ammo and a few painkillers. Return to the hallway and two thugs will open a locked door. Kill them and walk through it, where you'll find a busted boiler. Shoot it and it'll explode and fall through the weak floor. Fall through the hole and you'll gain access to the second floor.
Walk forward and kill the three thugs, then turn left and go through the doorway, where you'll find another Junkie. Kill him and walk through the room until you enter room 216. In here, a cutscene will activate showing a hooker named Candy Dawn talking about her job in her diary, where she offers sex to clients and videotapes it and sells the tape to the highest bidder (one of these clients is actually Alfred Woden). After that, go through her closet (which is in reality a door) and go through the door ahead. Turn left twice and then turn right, where you'll see three more thugs. Take out your Dual Berettas and gun them all down. Go into the elevator and presses the button on the pad to finish the level.
End of Chapter 3. You will continue to search for Muerte and gain access to Chapter 4. You'll also acquire some molotov cocktails.