S9534 Brothel Keeping and Prostitution Services in Australia Industry Report

Online alternatives: The industry faces growing
competition from web-based substitutes
IBISWorld Industry Report S9534
Brothel Keeping and Prostitution

Services in Australia
June 2014
Alen Allday
2 About this Industry
13 Demand Determinants
26 Revenue Volatility
Industry Definition
14 Major Markets
27 Regulation & Policy
Main Activities
15 International Trade
27 Industry Assistance
Similar Industries
16 Business Locations
Additional Resources
4 Industry at a Glance
28 Key Statistics
18 Competitive Landscape
28 Industry Data
18 Market Share Concentration
28 Annual Change
18 Key Success Factors
28 Key Ratios
5 Industry Performance
18 Cost Structure Benchmarks
Executive Summary
20 Basis of Competition
Key External Drivers
21 Barriers to Entry
Current Performance
21 Industry Globalisation
Industry Outlook
10 Industry Life Cycle
23 Major Companies
12 Products & Markets
25 Operating Conditions
12 Supply Chain
25 Capital Intensity
12 Products & Services
26 Technology & Systems
29 Jargon & Glossary
www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com
WWW.IBISWORLD.COM.AU
Brothel Keeping and Prostitution Services in Australia June 2014
About this Industry

Industry Definition
This industry comprises companies that

are mainly engaged in operating brothels
and providing escort and prostitution
services. The report analyses brothel
activity and legal transactions for actual
sexual services. The industry does not
Main Activities
The primary activities of this industry are
include stripping, erotic dancing, adult

internet services (such as dating or the
display of pornography), telephone sex
chat lines, the making and retailing of
adult video entertainment or the
manufacture and retailing of sexual aids.
Brothel operation
Prostitution services
Escort services
Massage parlour operation
The major products and services in this industry are

Brothel sexual services
Escort services
Hospitality and entertainment services
Other sexual services
Similar Industries
H4520 Pubs, Bars and Nightclubs in Australia

This industry includes pubs, bars and nightclubs that do not offer prostitution, stripping or any other sexual
services to patrons.
H4401 Hotels and Resorts in Australia
Some prostitution and sexual services activity is carried out in hotels, with costs incorporated in client fees.
C1320 Leather and Leather Substitute Product Manufacturing in Australia
A very small segment of this industry produces sex toys and leather fetish equipment.
H4404 Serviced Apartments in Australia
Some prostitution and sexual services activity is carried out in serviced apartments, with costs incorporated
in client fees.
IBISWorld
writes over 500 Australian

industry reports, which are updated
up to four times a year. To see all
reports, go to www.ibisworld.com.au
About this Industry
Additional Resources
For additional information on this industry

www.aaei.com.au
Australian Adult Entertainment Industry
www.abs.gov.au
Australian Bureau of Statistics
www.bla.vic.gov.au
Business Licensing Authority
www.pla.qld.gov.au
Prostitution Licensing Authority
www.sexworker.org.au
Resourcing Health & Education
www.scarletalliance.org.au
Scarlet Alliance
Industry at a Glance
Brothel Keeping and Prostitution Services in 2013-14
Key Statistics
Snapshot
Revenue
Annual Growth 09-14
Annual Growth 14-19
Profit
Wages
Businesses
$213.6m 4.2%
3.2%
$49.3m $74.8m 330
Real household discretionary income
Revenue vs. employment growth
% change
There are no major

players in this
industry
20
15
10
10
% change
Market Share
0
10
20
Year 06
5
0
08
10
12
Revenue
14
16
18
Year
20
08
10
12
14
16
18
20
Employment
SOURCE: WWW.IBISWORLD.COM.AU
p. 23
Establishments
5.9% 2.1%
ACT

Internet connections
WA
Real household
discretionary income
1.1%
SA
0.3%
NT
0.3%
TAS
13.5%
Business tourist nights
38.6%
QLD
International travel
to Australia
VIC
Average weekly
hours worked
38.2%
NSW
p. 5
SOURCE:
SOURCE:
Industry Structure
Life Cycle Stage

Revenue Volatility
Capital Intensity
Growth
Medium
Low
Industry Assistance
None
Concentration Level
Low
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 28
Regulation Level
Heavy
Technology Change
Low
Barriers to Entry
High
Industry Globalisation
Low
Competition Level
Low
Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
Sexual services have historically proven

resistant to economic slowdowns. Regular
clients of sex workers are regarded as
loyal, and will often abandon other
discretionary spending before reducing
spending on sexual services. However, in
2008-09, as unemployment began to rise,
consumers became uncertain about their
financial futures. As a result, industry
revenue fell substantially during the year,
while street prostitution increased. The
short-term cyclical effects of the global
financial crisis have since passed.
Nevertheless, the heavily regulated
industry (excluding illegal operators) has
raised fees across the board.
A number of other threats to the
industry have emerged as Australian
society has become increasingly liberal
with regard to sexuality, including
online matchmaking operations and
easy access to online pornography. For
the minimal cost of registering to a
matchmaking website, potential
industry clients are now able to access a
pool of like-minded individuals looking
for sexual meetings without payment, or
can satisfy their fantasies through easy
access to online media.
As economic conditions continue to
improve, the industry is forecast to grow
by 2.6% in 2013-14 to $213.6 million,

with annualised growth of 4.2% in the
five years since 2008-09. This relatively
strong growth has been driven by high
net-worth individuals that have the
discretionary income to use the industrys
services (particularly escort services)
regardless of economic conditions.
However, total industry growth has been
tempered by the rise of alternatives such
as matchmaking websites, pornography
and other substitutes, which are likely to
become more popular in future years. In
the longer term, online meeting sites
present a continuing challenge to
industry growth.
Over the next five years, regulation is
expected to be the main driver of growth.
Eastern states, such as New South Wales,
Victoria and Queensland, are attempting
to regulate and enforce regulation further,
while the WA Government is considering
banning the industrys activities entirely.
IBISWorld expects that the industry will
benefit from this heightened level of
regulation as illegal brothels drop in
prominence and legal entities are able to
capitalise on reduced competition.
Industry revenue is expected to grow at
an annualised 3.2% over the five years
through 2018-19 to $249.7 million.
As internet use continues to rise,
competition to the industry from
pornography and adult matchmaking
services becomes more accessible,
leading to an increased threat to the
industry. These substitute products and
services are a negative influence on the
industry due to easy and cheap access. In
2013-14, internet connections are
expected to continue increasing.
used when consumers feel financially

comfortable. A decrease in real household
discretionary income can therefore have a
negative impact on the industry. In
2013-14, real household discretionary
income is expected to decline.

Due to the high prices associated with
using brothel services, discretionary
income availability is an important driver
for industry customers. Many industry
services are considered to be
discretionary services, which are only
Business tourist nights

While travelling, some business people
are interested in pursuing the shortterm sexual relations provided by the
industry. Furthermore, the recent
growth in fly-in-fly-out work in Australia
related to the mining sector has been of
benefit to the industry. An increase in
business tourist nights provides the
industry with an opportunity to expand.
In 2013-14, business tourist nights are
expected to increase.

continued
International travel to Australia

The industry is positively affected by
tourism, especially tourism
accompanying major sporting events. For
instance, busy times at brothels in
Melbourne tend to coincide with the
Formula 1 Grand Prix, the AFL Grand
Final and the Spring Racing Carnival.
Such events tend to attract groups of
males that frequent bars, clubs and
brothels in the area. In 2013-14,
international travel to Australia is
expected to increase.
Average weekly hours worked

A decrease in average weekly hours
worked increases the amount of leisure
time available to consumers and is of
benefit to the industry. Some users of
sexual services tend to be careerintensive individuals that struggle to
allocate time to meet people in order to
seek a sexual relationship. Sexual
services are therefore seen as a
convenience for these people. The
average of weekly hours worked is
expected to decrease in 2013-14.
15
20
10
15
% change
% change
5
0
5
Year
10
5
08
10
12
14
16
18
20
Year
08
10
12
14
16
18
20
Current
Performance
Historically, demand for sex workers has

remained relatively steady regardless of
economic conditions, to the point that
some had labelled the industry recessionproof. Much of the sex industrys business
is made up of regular and frequent clients
that are disinclined to cease their visits to
brothels during slow economic times.
However, over the past five years, the
industry has been increasingly volatile,
with mixed economic conditions and

changing technological trends leading to
changes. The mining boom has led to
greater industry demand in regional
areasof Western Australia and
Queensland. Overall, industry revenue is
expected to grow by an annualised 4.2%
over the five years through 2013-14 to
reach $213.6 million, including a 2.6%
increase in 2013-14.
Industry changes and

challenges
While factors such as international

tourism growth have helped drive the
industrys performance, the consumer
shift to internet-reliant sexual activities is
a concern for providers. The increasing
presence of substitutes for industry
services is making it easier for potential
clients to look elsewhere. The two main
online-based challenges for the industry

are unprecedented access to internet
pornography, and a proliferation of
websites and smartphone apps that cater
to facilitating sexual meetings. The
internet is also assisting sex workers in
creating an individual brand that is easier
to sell, leading to a fragmentation of the
Industry changes and

challenges
continued
industry and growth in establishments.

Illegal competition has also constrained
industry revenue as regulation struggles
to address demand, and regulars have
lowered the frequency of visits.
Greater competition has led to stable
pricing levels, reducing profit margins.
IBISWorld expects that industry profit
decreased from 24.5% of industry
revenue in 2013-14 to 23.1% in 2008-09.
This has also been due to higher purchase
and licensing costs. Employee numbers

have increased over the past five years
due to the higher demand, and the
flexibility that escort work can provide
sex workers. In addition, increased
demand for services from women has
brought more heterosexual men into the
industry. This growth has led to growth
in establishment numbers in the industry
of an estimated annualised 2.2% over the
past five years.
Rise of casual sex
Changing social views regarding paid sex

are leading to profound shifts in the
industrys operating environment. Some
state governments are increasingly
leaning towards greater regulation of the
industry in an effort to contain the
industrys activities, improve health and
safety conditions for sex workers and
their clients, and make illegal activity
easier to identify, monitor and prosecute.
This change in attitudes is altering the
way the industry operates. Greater legal
and regulatory requirements will lead
venues to face higher tax burdens and
greater costs in meeting health and safety
requirements. In exchange for a better
environment, clients are facing higher
fees or reduced time for the same dollar
value. As a result, many former clients
are shifting to cheaper alternatives,
whether they be lower priced sex workers
or substitutes such as pornography or
adult matchmaking sites.
Adult matchmaking websites in

particular have provided a direct
competitive threat to the industry as
casual sex between consenting adults
grows more acceptable in society. While
matchmaking sites used to primarily
promote romantic relationships, several
now offer services that allow strangers to
arrange to meet for sex. This sidesteps the
moral concerns of paying for sex and
allows the participants a degree of control
over whom it is they see, rather than the
sex workers at brothels, who have less
ability to choose. Sites such as www.
adultmatchmaker.com and www.
flingfinder.com have grown markedly in
the past five years. Once confined to the
back pages of the classifieds, these services
are now advertised on late-night TV and
across the internet, and present a serious
long-term challenge to the industry. These
matchmaking services have further
evolved into smartphone apps.
Pornography
competition
There are now more alternatives to paid

sex than ever before. When times are
tough, more clients are now likely to resort
to cheaper alternatives. Clients that lose
their jobs or face a decrease in income
may be reluctant to stop patronising sex
workers and may simply shift to lower cost
operators, depriving the industry of
revenue without lowering patronage.
Beyond matchmaking sites, the
internet presents another challenge to
the industry: easy access to pornography.
Internet pornography is easily accessible,
oftentimes free, and its appeal is

increasing. While pornography is not a
direct substitute for the services offered
by a sex worker, it is considerably
cheaper. On the other hand, easy access
to pornography has led to a larger
amount of the population becoming
intrigued by more exotic sexual acts, to
the benefit of the industry. Such acts,
which usually command higher fees, are
therefore rising in demand among sexual
services providers.
A strong dollar and stable economic
Pornography
competition
continued
conditions have encouraged Australians to

travel overseas rather than domestically.
Weak developed economies (such as those
in Europe and the United States) and a
strong dollar are limiting growth in
overseas visitors coming to Australia, and
reducing their discretionary spending
once they are here. However, clients that

use industry services while travelling on
business are expected to remain a buoyant
segment. Business spending on sex
workers, such as escorts, is highly unlikely
to be replaced by a substitute service such
as online meeting agencies.
Social acceptance
and representation
Greater social acceptance is creating a

bolder industry. The emergence of the
Sex Party as a mainstream player in the
2010 federal election is an example of
this. As part of its socially liberal
platform, the party advocates for sex
workers. Additionally, over the past five
years, sex clubs have effectively
marketed themselves to a wide audience.
Companies tend to hire drive-around
advertisement boards, pay for

billboards, and advertise on TV and the
internet. This advertising has helped
normalise sexual services in the eyes of
many, especially the young males they
seek to attract. Furthermore, brothels
have been successfully moving away
from cities to the suburbs in response to
this greater social acceptance and
cheaper rental costs.
Industry
Outlook
A mining slowdown, growing regulation,

rising interest in alternative sex practices
and general sexual liberalisation are
likely to continue altering the industry
over the five years through 2018-19.
However, increasing international

tourism from Asia (with increasing
disposable wealth) is expected to inject
more money into the industry during
these years.
Increased industry
competition
Over the five years through 2018-19,

industry revenue is forecast to increase at
an annualised 3.2% to reach $249.7
million, including a 2.1% increase in
2014-15. Profit margins in future years
will continue to be challenged by
increasing competition. Establishment
numbers are expected to gradually grow
as fragmentation continues. Further,
employee numbers are forecast to
increase at a moderate annualised rate of
1.4% as fragmentation increases
competition and discourages some from
entering the industry or remaining in the
profession. The growing popularity of
viable alternatives to paid sex is set to be
the main factor constraining growth over
coming years, as improving internet
acceptance and security alleviate public
concerns about the safety and practicality
of online sexual rendezvous.
With greater access to pornography
Industry revenue
20
% change
10
0
10
20
Year 06
08
10
12
14
16
18
20
and matchmaking websites, the clients of

brothels and sex workers have a greater
number of easily accessible alternatives
for sexual services. Social acceptance of
sex work has been matched by
acceptance of a greater sexual liberalism,
Increased industry
competition
continued
which has aided the more mainstream

acceptance of internet adult
matchmaking agencies. These services
will pose a significant risk to the industry
over the next five years. Individuals use
these adult matchmaking sites to
orchestrate sexual liaisons with people
that often remain otherwise anonymous.
This negates the need to pay for sexual

gratification and sidesteps some of the
potential moral difficulties posed by
soliciting sex workers. These sites will
continue to gain popularity over the next
five years, forcing sex service providers
to adapt their services to maintain
revenue growth.
Continued future
online growth
Significant expansion of the internet for

pornography and adult matchmaking
services will continue to threaten
industry growth. Organised brothels are
finding it difficult to capitalise on the
internet, as attendance at the brothel
itself is required for services. However,
sex workers that previously walked the
streets to find work are moving online
and using the very sites that pose a
threat to the industry to promote their
services. There is no organised move to
facilitate this process, primarily due to
its illegality, but there is potential for the
loosening of such laws in the future.
Likewise, escort services have taken to
the internet with vigour. Less
constrained by geographic concerns than
brothels, escorts can conduct the bulk of
a transaction via the internet before
either party meet. This increases the
level of discretion, and removes the
awkward process of a financial
transaction from the event itself, which
is of significance to many clients.
The anticipated moves towards further

legalisation and decriminalisation of
brothel and escort services across
Australia may lead to a real reduction in
prices, due to a rise in the supply of sex
workers and greater competition, as has
occurred over the past five years. This
could temper revenue growth, even
though demand is expected to grow at a
greater rate. Legalisation,
decriminalisation and improved
regulatory control should reduce the
industrys required rate of return. Such
moves will also increase the number of
smaller establishments where sex
workers are entitled to a portion of
business profit margins. For these
operations, sex workers will have the
ability to share in owner profit, which
may reduce the price sought by these sex
workers to maintain their current income
levels. Many local councils are
aggressively pursuing and prosecuting
illegal brothels, which will likely improve
trading conditions for legal operators.
Future regulation and

other trends
Greater regulation and decriminalisation

of prostitution will lead to legal outlets
charging more for the security, safety and
health of legitimate providers, which will
boost industry revenue. The Victorian
Government has established a sex industry
police unit to crack down on illegal
sex-work activities, which is expected to
lower competition in the state. New South
Wales is also intending to bring in a higher
degree of regulation regarding brothel
management and licensing. This is not a
nationwide trend, however, with the WA
Government currently looking to ban
prostitution in the state.

Over the next five years, there is
expected to be an increase in the
number of women who pay for sexual
services. An increase in the availability
of sexual material via telephone, the
internet, on pay TV and video media
may also positively affect demand for
sexual services from women.
Nevertheless, there may be an increase
in competition from introduction
agency services, internet sites and clubs
that provide contacts for casual nonpaying sex.
10
Reflecting strong revenue expansion and low barriers
to entry, establishment growth has been buoyant
Life Cycle Stage
The adoption of electronic communication has

reduced industry costs and increased efficiency
The industry has increased its product
range as consumer tastes change
% Growth in share of economy
Public acceptance of services provided is

increasing, despite moral concerns
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Growth Industry

Revenue grows faster than the economy
Many new companies enter the market
Rapid technology & process change
Growing customer acceptance of product
Rapid introduction of products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Brothel Keeping and Prostitution Services
Hotels and Resorts
Serviced Apartments
Cosmetics and Toiletry Wholesaling

Pharmaceuticals Wholesaling
-5
-10
-10
Decline
Leather and Leather Substitute Product

Manufacturing
-5
10
Shrinking economic
importance
15
20
% Growth in number of establishments

11
Industry Life Cycle

This
industry
is G
rowing
While the industry faces considerable and

growing competition from the numerous
alternatives available online and in
physical outlets, the industry remains in
the growth phase of its economic life
cycle. Demand for sex services has been
so reliably constant that any decline could
only be induced by the strongest of
competitors or a major external factor
such as surges in sexually transmitted
diseases. Whether online matchmaking
sites will prove to be that competitor will
be determined over coming years.
There has also been a rise in the
number of sexual service products that
are being offered, and wider acceptance of
escort work, which increases client
numbers. While there has been some rise
in consumer acceptance of sexual
services, the industry still has a negative
image, largely due to the moral, health
and safety issues associated with it.
Despite the prevalence of industry
organisations in society, operators are
acutely sensitive to bad press that reduces

the trust between industry clients, the
authorities and the general public.
Over coming years, while there are few
markets left to tap, the way in which the
industry does business will inevitably be
affected by ongoing growth in public
internet access. This will give providers
greater ability to access potential clients
directly, and give potential clients greater
access to alternatives to paid sexual
services. The likely net effect of the
internet on the industry will be a negative
one, although independent, illegal
operators are likely to have greater
control over their operations, which will
counteract the move to organised,
registered brothels in coming years.
Overall, for the 10 years through 2018-19,
industry value added (the industrys
contribution to national GDP) is expected
to grow at an annualised 3.3%, higher
than estimated annualised GDP growth
over the same period of 2.6%.
12
Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

Z Consumers
Consumers use sexual services in order to gain sexual satisfaction.
KEY SELLING INDUSTRIES
Products & Services
F3721
Pharmaceuticals Wholesaling in Australia

Firms in this industry supply rubber gloves, condoms and oral dams to be used by prostitutes
servicing clients.
F3722
Cosmetics and Toiletry Wholesaling in Australia

Establishments in this industry supply rubber gloves, condoms and oral dams to be used by
prostitutes servicing clients.
M6940
Advertising Services in Australia

Advertising is particularly prevalent in the sexual services industry. Top-end establishments
tend to produce glossy adverts and flyers.
S9531
Laundry and Dry-Cleaning Services in Australia

Operators in this industry provide laundry and dry cleaning services to brothels. Most brothels
use strong antibacterial cleaning products.
The products and services offered by the

industry are heavily determined by state
regulation and mainly comprise brothel
sexual services, escort services, massage
services and legal street work.
Brothel sexual services make up the largest
proportion of industry revenue, at an
estimated 32.9% of industry revenue in
2013-14, down from 33.7% in 2008-09.
Some brothels take a proportion of a sex
workers earnings, while in other cases
payment is made directly to the brothel.
While legal brothels only operate in the

eastern states, the heavy weighting of the
Australian population and tourism
towards these states helps keep this service
in demand. However, cheaper services
offered by unlicensed brothels, and the
lack of discretion compared with other
types of services, has meant that these
services are declining as a proportion of
the industry. Some up-market brothels in
the main capital cities and large Australian
cities look to attract clientele with
luxurious facilities, complimentary drinks
and a wide selection of sex workers.
Products and services segmentation (2013-14)
10.2%
25.3%
32.9%
31.6%
Escort services
Total $213.6m
13
Products & Markets
Products & Services

continued
Demand
Determinants
Escort services
The second-largest segment in the
industry is escort services provided by
escort agencies and private workers.
These operators tend to service the high
end of the market, offering a wide range
of sexual services to heterosexuals,
homosexuals and couples, including
specialised sexual and bondage services.
Sex workers providing escort services pay
a proportion of earnings to an escort
agency, or the escort agency pays an
escort from client payments. The internet
has helped this segment to become more
popular, as it has aided the ease and
discretion with which clients can contact
operators, which is an attractive feature
for many consumers. The mobility
afforded by private and escort work has
also allowed this segment to increase its
market share, as these services can be
easily provided in mining towns and rural
areas that restrict brothel zoning. This
segment is estimated to account for
39.3% of industry revenue in 2013-14, up
from 38.8% in 2008-09.
industry revenue in 2013-14, almost

unchanged from 25.4% in 2008-09.
Clients at some establishments pay a
room rental fee that includes sexual
services from a sex worker, or the sexual
services fee is negotiated with the sex
worker. Some establishments charge
clients an entry fee. Drinks and other
refreshments are sometimes
complimentary to paying clients.

include drinks, room, accommodation
and entry fees charged to clients. These
are estimated to account for 25.3% of

Other sexual services are expected to
account for 10.2% of industry revenue in
2013-14, almost unchanged from 10.1%
in 2008-09. These other sexual services
include legal street work and massage
services. Street work, which is only legal
in New South Wales, has decreased in
prevalence over the past decade. This is
due to the gentrification of the inner
suburbs of most major cities, which has
driven the business indoors and resulted
in a greater number of low-end brothels.
Massage parlours offer sexual services
with more conventional forms of
massage. Over the past five years, these
activities have grown in popularity as one
of the cheaper sexual services provided
through the industry. However, many
establishments providing these services
are not regulated.
Consumer confidence is critical to the

success of the industry given the range of
cheaper alternatives to industry services.
Consumer confidence relates to factors
such as future earnings expectations and
the ability to pay off debt. High and
increasing discretionary incomes can
result in more people (primarily men)
purchasing sexual services from the
industry. However, some industry clientele
do not view these services as discretionary
and will sacrifice a great deal of income to
continue using sexual services.
Consumers may compare the price of
sexual services to the price of purchasing
substitute products, such as
pornography, adult matching services, or
telephone sex services that are outside
the industry. However, price effects on

demand can be moderate, only having a
minor influence on a potential clients
decision to buy. Increases in costs are
more likely to result in clients seeking
lower cost sexual services, rather than
abandoning their custom altogether.
Demand is likely to be highest in
specific geographic locations with a
strong male presence. Such a population
imbalance in Australia typically occurs in
mining towns or areas with a major
military base. Demand is also likely to be
greatest when a business is
geographically well positioned, as many
sexual service purchases are
spontaneous. City centre locations,
locations close to pubs and clubs, and
14
Products & Markets
Demand
Determinants
continued
especially discreet areas, will increase

customer volumes.
Sexual services demand is likely to
increase when inbound tourist numbers
are high. Traditionally, demand for sexual
services has been highest during sporting

events such as the Formula 1 Grand Prix,
football grand final weekends and horse
racing carnivals. The Christmas and New
Years Eve period is also a busy period.
Major Markets
Sexual services from the industry are

mainly provided to adult males.
According to the The Sex Industry in
Western Australia: a Report to the
Western Australian Government, 2010,
approximately 1.9% of the male
population purchase sexual services. An
even smaller proportion of females use
the industrys services. The primary
service provided by the industry is
heterosexual sex provided to male clients.
While demand for fetish sex services is
growing partly due to the proliferation
of internet pornography and the publicity
and normalisation of fetish sex the
market is still relatively small. However,
demand is growing at a fast pace and
providers are generally able to charge a
premium price for such services.
The main reasons for heterosexual
men to visit sex workers are the pursuit
of new sexual experiences, the pursuit of
sexual experiences that are hard to find
elsewhere, or the attempt to fill an
emotional or sexual void. While in the
past, homosexual men would visit male
sex workers due to a lack of open
homosexuality in the community, the

internet has allowed the lesbian, gay,
bisexual and transgender community to
grow and has diminished the demand for
this type of service.
Men aged 18 to 29 years
Approximately 28.8% of industry revenue
is estimated to be from men aged 18 to 29
years. This is down from 29.7% in 200809 as sexual activity becomes more liberal
due to changing cultural norms and easier
to achieve through advancements in
technology. Websites and smartphone
applications, such as Adult Matchmaker
and Tinder, have allowed this market
segment to find free alternatives to sexual
services from the industry. This market
segment has, however, been buoyed by
the increased uptake of the industrys
activities in mining towns where there are
few females and a large number of young,
male mine workers.
Men aged 30 to 40 years make up the
largest market for the industry at an
Major market segmentation (2013-14)
5.8%
Women and couples
28.8%
34.5%
30.9%
Men aged 41 and over
Total $213.6m
15
Products & Markets
Major Markets
continued
International Trade
estimated 34.5% of industry revenue in

2013-14, down from 34.7% in 2008-09.
Men in this market segment are still
interested in an active or varied sex life,
which may not be easy in their current
relationship status. However, like
younger men, this market has been
declining in stature as free alternatives
help provide many of the services that the
industry provides. Affair websites, such
as Ashley Madison and burgeoning
online swinger communities, offer free
alternatives to many married men.
Men aged 41 years and older
Men aged 41 years and over are
estimated to account for 30.9% of
industry revenue in 2013-14, up from
30.1% in 2008-09. Disposable incomes
for men over 41 years tend to be higher
than those of younger age groups, and
this age group tends to use discretion
when purchasing sexual services. This
suggests that their service preference
has shifted towards high-end escort
agencies. Over the past five years, this
segment has been increasing as
demographic trends associated with the
baby boomer generation put more men
into this market.
Women and couples

The women and couples segment of the
market has been an area of moderate
growth during the past five years, from
5.5% of industry revenue in 2008-09 to
5.8% in 2013-14. Given the increasing
sexual liberalisation of society, including
the sexual freedom of women, the female
customer segment is expected to grow
moderately over the next five years.
However, it is unlikely that sexual
services to women will ever reach levels
beyond that of a niche segment. The most
frequent reason that women have for
using these services on a regular basis
tends to be a desire for physical intimacy
that these women may lack in their
long-term relationships. More occasional
clients tend to seek out a feeling of desire
directed towards themselves that they
have struggled to find elsewhere.
Associated with this increased sexual
liberalisation is a greater openness to
different types of sexual activity involving
more than two people. While still
somewhat taboo, couples that are openminded may choose to use the services of
a sex worker to avoid the embarrassment
of approaching friends or a stranger for
participation in such activities.
This industry is mainly engaged in

providing personal services to the
Australian population, although
tourists to Australia may also use those
services. For instance, demand for
sexual services tends to increase
during events such as the Formula One
Grand Prix in Melbourne and the
grand finals for various football codes.

Also, some high-end service providers,
primarily escort services that provide
high-end call girls, may occasionally
send an employee overseas upon
special request. Overall, however, the
level of international trade in the
industry is negligible.
16
Products & Markets

Business Locations 2013-14
NT
0.8
QLD
17.1
WA
8.7
SA
2.4
NSW
36.1
ACT
1.7
VIC
32.3
Revenue (%)
Cold Zone (<10)
<25
<50
Hot Zone (<100)
Not applicable
TAS
0.9
17
Products & Markets
New South Wales, Queensland and

Victoria together account for account the
majority of all businesses in the industry
at an estimated 90.3% in 2013-14, with
New South Wales holding the highest
proportion. These figures are heavily
determined by regulatory discretion.
Tasmania and South Australia have
criminalised the establishment of
brothels, meaning any activity in the state
occurs via escort agencies or on a private
basis. In Queensland, the high regulatory
burden that brothels must abide by and
criminalisation of private sex work in the
state has meant that the states industry
has suffered over the past five years as
the industrys activities increasingly rely
on online and personal avenues of
communication and advertisement.
This increased leniency towards
Distribution of revenue vs. population
organised sex work from the eastern

states has also led to an increase in the
spread of the industrys activities into
some suburbs, where previously
operations were confined to red-light
district areas in capital cities. On an
industry revenue basis, Queensland and
Western Australia account for a higher
proportion than industry establishments.
From a demand perspective, this reflects
the relatively low average age of the
population, low population density and
the high number of mining regions in the
two states, which positively affects
demand for sexual services as these areas
are male-heavy populations. Higher
industry revenue in Queensland is also
due to high levels of tourist visits to the
state as tourists may be more likely to use
some of the industrys services.
Distribution of revenue vs. establishments
40
30
30
Revenue
Revenue
Population
Establishments
WA
VIC
TAS
SA
ACT
WA
VIC
TAS
SA
0
QLD
0
NT
10
NSW
10
QLD
20
NT
20
NSW
Percentage
40
ACT
Percentage
Business Locations
18
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalisation
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
The industry has a low concentration

level with the four largest companies
estimated to account for 6.4% of industry
revenue in 2013-14. The main reason for
the industrys fragmented nature is that
nearly every company operates on a
small scale, with chain operations being
rare in the industry. The largest
establishments, such as Daily Planet and
Stiletto, have a large number of sex
workers. However, many of these are
usually self-employed, with the brothel
owner receiving payment for room rental
from the client and not the sex worker,
while payment for the actual sexual
service is often made directly to the sex
worker. There are many non-employing

establishments, such as self-employed
sex workers that work from home or
from a clients home or a hotel.
The high industry regulation level
restricts establishments from growing to
the point where they may attract a larger
market share. Industry concentration will
remain low as continuing low barriers to
entry, coupled with stiffer regulations for
firms attempting to expand, will see only
small enterprises enter the industry.
Continued growth in public acceptance of
industry services, along with steady
demand growth, will also encourage
more small firms to enter the industry.
Having a good reputation

A reputation for providing quality
services, a large quantity of sex workers,
a variety of sex workers, and a clean, safe,
secure and discreet service will ensure
new and repeat custom.
Providing client confidentiality

Given the moral stigma attached to sexual
services, discretion is imperative. This
means safe and secure parking facilities
and unnamed credit card charges.
Having a loyal customer base

Due to the personal nature of services,
many sex workers tend to have regular
clients. Most major brothels have
membership schemes and aim to reward
loyalty to the establishment (though not
necessarily to the actual sex worker).
Effective product promotion

Promotion aims to promote the erotic
appeal of services (without being
pornographic). Good promotion will
titillate a potential customer, without
highlighting the moral, health or safety
concerns of the services.
Must comply with

government regulations
Industry regulation is heavy and most
operators are under constant public
scrutiny due to the controversial nature
of the provision of sexual services.
Access to multiskilled and

flexible workforce
Sex work is seasonal and hours are
unsociable. Also, customer wants and
needs may differ significantly. The more
flexible and multiskilled the workforce, the
greater will be new and repeat business.
The shift in client behaviour towards

arranging meetings online rather than
engaging industry services will likely to
lead to a shift in how the industry behaves.
Low-end providers will lose clients, and
profit is expected to fall. As a result, some
mid-level operators are expected to
reposition themselves as premium
providers, hoping that higher costs will be
balanced by growth in revenue.
Profit
Industry profit is high as brothels have
relatively low costs and generally receive
a portion of payments made to their sex
workers. Cost savings by hiring casual
and part-time workers also reduces
industry costs. Brothels also charge high
prices for drinks and other provisions
ordered by clients, which contributes to
high profit margins. IBISWorld estimates
19
industry profit will account for 23.1% of

industry revenue in 2013-14, down from
24.5% in 2008-09. Over the past five
years, profit margins have decreased as
increased external competition, often at
cheaper prices, makes the industrys
services less appealing, limiting industry
demand growth.
Wages
The industry is highly labour-intensive,
with most sex workers operating within
brothels as subcontractors. In legal
brothel and escort agency businesses,
sex workers generally retain one-third to
half of income received from a client. In
this working arrangement, the
remaining earnings can be paid directly
from the client to the proprietor as room
rental or agency costs. The proprietors
share of revenue income meets the
wages of reception, cleaning, security
and bar staff. For larger operators,
effective itinerary management and the
employment of part-time workers can
reduce wage costs. The industry is not
only highly seasonal in nature with
demand highest during major sporting

and cultural events but also tends to
be busiest during certain hours of the
night, which means most operations
have a skeleton day staff. IBISWorld
estimates industry wages have decreased
from 36.2% of industry revenue in
2008-09 to 35.0% in 2013-14. This is
due to low growth in fixed costs with
moderate employment and wage growth
over these years compared to higher
revenue increases.
Purchases
Industry purchases are estimated to
account for 22.9% of industry revenue in
2013-14, up from 20.6% in 2008-09.
Purchases costs include food and
beverages for purchase within
establishments; condoms, lubricants and
other safety equipment; fantasy or fetish
equipment, such as uniforms or bondage
ropes; travel expenses for escort agency
staff; general consumables, such as
towels and linen; and cleaning products.
Contract services, such as security and
cleaning are also included as purchases.
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2013-14)
100
4.9
80
Percentage of revenue
Cost Structure
Benchmarks
continued
Industry Costs
(2013-14)
8.5
2.7
12.7
60
23.1
2.4
1.4
8.7
5.8
3.3
Profit
Rent
Utilities
Depreciation
Other
Wages
Purchases
36.3
35.0
40
20
32.5
22.7
0
20
Cost Structure
Benchmarks
continued
Higher purchase costs over the past five

years is due to greater demand for
high-end facilities, beverages and other
inputs as brothels look to provide better
service and experience standards.
Rent
Industry rental costs are difficult to
quantify, as many sex workers pay none,
while others work as subcontractors to
brothels, which means they rent a room
that they can use with their own clients.
Brothels rent, lease or own facilities that
sex workers provide services to clients in,
while some escorts provide services
within hotel, motel or serviced
apartments. Other sex workers, operating
independently, may use their own home
as a location for work. Overall, rent costs
are estimated to account for 8.7% of
industry revenue in 2013-14, up from
8.5% in 2008-09 due to higher real estate
prices over these years.
Depreciation and utilities
Depreciation allowances are made for
beds, furniture, office equipment,
computer technology and software used
by most industry operators. Large
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Lowand the trend
is I ncreasing
Internal competition refers to the ways

brothels and other sexual services
providers compete with each other.
External competition refers to
competition from substitute services and
other industries.
Internal competition
As beauty is subjective, a business may
seek competitive advantage by offering
the largest selection of employees. Such a
claim would attract regular clients
wanting a different sex worker or sexual
service each visit, and increase the
chances that a client will find his or her
ideal look. The reputation of an
establishment, the cleanliness of the
premises, and the mandatory use of
condoms all contribute to a clients
decision in attending a given venue.
organisations also have to maintain

infrastructure and valuable fittings. Some
top-end brothels maintain a gentlemens
club aesthetic, which can lead to costly
fit-out and refurbishment costs. An
appeal to high-end markets and growing
professionalisation has led to a slight
increase in depreciation over the past five
years, from 3.1% of industry revenue in
2008-09 to 3.3% in 2013-14. Utilities
include electricity, gas and water, and are
estimated to account for 1.4% of industry
revenue in 2013-14, up from 1.3% in
2008-09 due to higher electricity prices.
Other
Other industry expenses include
insurance, communications, legal costs
and advertising. Larger operators can
have significant advertising budgets
usually spent on flyers, newspaper
advertisements and billboards in relevant
areas. Smaller brothels and independent
workers also tend to advertise in the
classifieds section of newspapers, adult
magazines and various websites. These
other costs are estimated to account for
5.8% of industry revenue in 2013-14,
unchanged from 2008-09.
Further, condoms are legally compulsory

for any penetrative sex act in a sexual
services establishment and are supplied
by the sex worker or the establishment.
Although the industry is moderately
price competitive, this factor is minimised
due to the trade-off between the health
and safety, and attractiveness of sex
workers and the price paid. As prices are
generally not widely available prior to
transactions, making a choice of provider
based on price is difficult for customers,
while the relatively spontaneous nature of
demand for sexual services works against
price-based shopping. Price is generally
correlated to the quality and exclusivity of
the establishment and the sex workers
provided, and many customers are aware
that they will pay a higher price for
premium services.
21
Basis of Competition
continued
External competition
The sex industry has long faced
competition from alternative sexual
goods and services. However, there can
be a positive effect in the growing
popularity of sex-based products. For
example, growth in the accessibility of
pornography online has had no
discernible impact on demand for sex
services, suggesting that such products
Barriers to Entry
There are few capital and set-up costs

associated with establishing a new
business in the industry. Often, in the
case of brothels and escort services, a
residential house can be used as a brothel,
or no fixed location at all is required for
escorts. For the workers themselves, the
work is generally unskilled, although
experienced and specialised workers can
charge more for their services. The
reliable supply of sex workers can be an
entry barrier for some new firms.
The majority of new industry entrants
tend to begin at the lower end of the
industry, providing services at low prices,
hopefully in a region where there is
minimal competition from similarly
priced competitors. This has the added
benefit of avoiding the many regulations
that can affect an establishment in the
industry as it grows larger. Regulations
generally form a barrier to companies
expanding, rather than establishing
themselves. Laws to open a brothel
generally extend to requiring registration
with the state government, while larger
companies are limited in the number of
rooms they may provide and are subject
to advertising limitations in particular
Level & Trend

arriers to Entry
B
in this industry are

Highand S
teady
Industry
Globalisation
Level & Trend
lobalisation
G
in this
industry is L owand
the trend is S
teady
Overall, the industry has a low

globalisation level and is primarily
oriented towards providing sexual
services to individuals located in
Australia. Therefore international trade is
not applicable to the industry and most
firms only have facilities in Australia.
However, some brothels predominately
have a complementary function to the

industrys services. However, the growing
use of online sites to arrange sexual
meetings between consenting strangers
stands as a substantial external threat to
long-term industry viability. While there
is no likelihood of the industry becoming
obsolete, clients looking to avoid paying
for sex may lead to ongoing reductions in
demand as these customers move online.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Level
Low
Low
Growth
Low
Low
Heavy
None
states and territories.

Barriers are significantly higher
regarding stripping and exotic dancing.
Venues are generally set up to resemble
bars or clubs, requiring substantial initial
outlay, along with musical performers to
accompany the dancing. Skills for staff
are also higher, requiring some dancing
training, which is generally not provided
by the employer, but is a requisite of
employment. Alcohol is generally served
at these venues, which means liquor
licensing regulations apply, along with
those that apply to exotic dancing. Often,
these venues are opened by larger
corporations with an interest in the
industry as a whole.
have sex workers of particular ethnicity.

In Queensland, there are currently six
legal and registered brothels that mainly
have sex workers of Asian backgrounds.
The Prostitution Licensing Authority
(PLA) in Queensland monitors such
establishments for any potential human
trafficking for sex work purposes.
22
Industry
Globalisation
continued
Globalisation has benefitted growth is

some competing services, such as the
operation of lap and table dancing
establishments. Some companies have
franchised operations in Australia and
elsewhere, such as Spearmint Rhino,
which has 2,700 employees and 6,000
entertainers across 20 venues in the

United States, the United Kingdom,
Central Europe, Russia, and Australia.
However, the success of these operations
is largely dependent on the quality of
local employees rather than global
marketing campaigns.
23
Major Companies
There are no major players in this industry | Other
Other Companies
The Brothel Keeping and Prostitution

Services industry is highly fragmented.
However, due to the industrys size, there
are some significant players. The majority
of the larger players are brothels in major
metropolitan cities, mainly Sydney,
Melbourne and Brisbane. Many of the sex
workers that work in such establishments
are effectively self-employed, with the
customer paying the brothel owner for
room rental, rather than the brothel
owner taking money from sex workers
direct earnings.
Planet Platinum Limited
Estimated market share: 1.8%

Originally planned as an investment
strategy to diversify away from the Daily
Planet, the company was the first brothel
in the world to be floated on the stock
market in 2003. The largest brothel in
the southern hemisphere, the Daily
Planet is based in the Melbourne suburb
of Elsternwick and has 18 private rooms
or suites with various facilities, including
two-person or four-person showers,
eight-seat spas and beds large enough to
accommodate a small group. A failure to
find a suitable buyer has led to the entity
collecting rental income from the Daily
Planet, along with revenue from
Melbourne strip club Showgirls Bar 20.
The Daily Planet also offers escort
services. Seasonally, there are between
100 and 150 female sex workers working
on a rotational roster. There are also
about 30 non-sex workers, including
receptionists, hostesses, bar staff,
security, towel staff, cleaners and
maintenance staff.
The company reported revenue
totalling $4.3 million in 2012-13,
unchanged from the previous year, and
profit of $0.3 million. Some of this
revenue is from Showgirls and is not
included in the industry. IBISWorld
estimates revenue applicable to the
industry will total $3.8 million in 201314. During 2010-11, the company lost
revenue as the Victorian Civil and
Administrative Tribunal cancelled its
liquor licence after attributing repeated
assaults, drunkenness and antisocial
behaviour to the venue. While this dented

its 2010-11 profit, Showgirls Bar 20
managed to overturn the decision in the
Supreme Court in July 2011, allowing
business to return to normal. However,
its failure to submit a finalised annual
report to the ASX caused the company to
be temporarily suspended from official
quotation later in the year.
Royalty Escorts

Royalty Escorts is a Sydney operation that
provides top-end escorts to clients both
domestically and internationally, with
bases in Melbourne and Sydney. Royalty
Escorts was established in 1999 to provide
20 to 32-year-old female companions to
wealthy clients. Employees are contracted
only upon successful completion of a
background check, personal interview and
high-society tutorial. Royalty Escorts
services the top end of the sexual services
market, providing escorts with modelling
backgrounds to clients for negotiable
prices ranging from $5,000 a night to
$130,000 a month. The bulk of business
comes from visiting businessmen being
entertained by corporations, and from
wealthy domestic businessmen looking
for accompaniment, either to a specific
function or one-on-one. IBISWorld
expects that revenue applicable to the
industry will total $3.6 million in 2013-14.
Blackfeather Limited

Blackfeather Limited is a private company
that operates the Black Feather escort
agency, and owns and operates Sydneys
largest brothel, Stiletto. It currently has 19
rooms, with suites costing up to $370 per
hour. The company gained media attention
in 2011-12 when, with the help of Delecta
Limited, it attempted to significantly
expand its operations. The expansion
would have raised its space to 40 working
rooms and 21 waiting rooms, making it the
largest brothel in Australia. However, the
proposal was initially rejected by Sydney
City Council due to its expected effect on
the surrounding brothels and general
community disapproval. Although an
24
Major Companies
Other Companies
continued
amended development was approved in

June 2012, the expansion has stalled as at
mid-2014. IBISWorld expects revenue
applicable to the industry will total $3.4
million in 2013-14.
Boardroom Escorts International

Established in 1999, Boardroom Escorts
International is located in Sydney and
offers sex services and escorts. Like the
Daily Planet and Stiletto, the Boardroom
is marketed as an upscale gentlemans
club and has a strong internet presence.
Several fantasy rooms are offered to
clients, establishing Boardroom Escorts
International as one of the premier
up-market establishments in Australia.
The Boardroom also provides an escort
service for clients in other cities. Revenue
applicable to the industry is expected to
total $2.8 million in 2013-14.
Delecta Limited
Delecta Limited is an Australian adult

business behemoth, mostly involved in
wholesaling adult goods. While the
company initially started out as a phone
sex operator, its foray into selling adult
products online, through www.adultshop.
com, resulted in a huge increase in
company revenue. However, increased
ease of access to internet pornography
has caused its online operations to suffer,
with the bulk of the companys operations
now within its wholesale arm. In
response to these ongoing concerns, the
company has worked to diversify its
investments by attempting to purchase
and expand the Stiletto brothel in Sydney
during 2011. However, this plan was
halted when the company could not
secure financing for the project.
Administration Entertainment
Management Services
With four locations in Sydney, including
Mens Gallery, Pure Platinum and
Dancers Cabaret, Administration

Entertainment Management Services is
Australias largest up-market strip club
operator. With a variety of separate
rooms and stages, these venues provide
competition to the industry through strip
club and pole dancing entertainment. A
large portion of revenue comes from
international business visitors, and mens
groups such as bucks nights. In late
2013, Mens Gallery and Pure Platinum
were placed into administration due to
tax department debts, though both
continue to operate.
Spearmint Rhino
Spearmint Rhino Gentlemens Clubs and
affiliated companies are the worlds
highest grossing upscale gentlemens club
chain, operating 20 locations around the
globe. With over 2,700 employees and
6,000 entertainers throughout the
United States, the United Kingdom,
Central Europe, Russia and Australia,
Spearmint Rhino has devoted its efforts
to creating a collection of upscale clubs
across national borders in an attempt to
create the worlds first truly franchised
strip club organisation. While only one
Spearmint Rhino exists in Australia
currently (in Melbournes CBD), future
expansion is likely, which would increase
external competition for the industry.
Giga Pty Ltd
Giga is the owner of the website www.
adultmatchmaker.com.au and other
similar websites that are currently the
premier online destinations for adult
matchmaking in Australia. The
websites, unlike other online dating
sites, encourage members to pursue
meetings of a purely consensual sexual
nature for free by providing a forum
that allows members to analyse member
profiles to find someone that interests
them. This is further external
competition for the industry.
Brothel Keeping and Prostitution Services in AustraliaJune 2014 25
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is L ow
The industry has a low capital intensity

level. Capital costs are minimal and
equipment or systems are not usually
required for delivering most services.
However, advertising is important for
industry firms, and most large players
have an internet presence to publicise and
normalise their services. Brothels with bar
and entertainment facilities incur higher
capital costs to fit-out establishments.
To calculate the capital intensity
level, IBISWorld uses data from the
industry cost structure. Depreciation is
used as a proxy for capital and wages
are used as a proxy for labour. These
show that in 2013-14, for every $1.00
spent on capital equipment,
approximately $10.61 will be required
for labour inputs. The average declared
wage paid to a sex worker in the
industry is low, with cash-in-hand
Capital intensity
Capital units per labour unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Personal
Services
Brothel Keeping
and Prostitution
Services
Dotted line shows a high level of capital intensity

transactions reducing industry wage

levels. Although the work is largely
unskilled, the pay rate reflects other
aspects of work. These include a
proportion of received cash from a
Tools of the Trade: Growth Strategies for Success

Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labour skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Cosmetics and Toiletry

Wholesaling
Capital Intensive
Labour Intensive
New Age Economy
Brothel Keeping and Prostitution Services

Serviced Apartments
Hotels and Resorts
Traditional Service Economy
Wholesale and Retail. Reliant Pharmaceuticals

on labour rather than capital Wholesaling
to sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Leather and Leather Substitute

Product Manufacturing
Change in Share of the Economy
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labour abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialise
in niche, high-value products.
Capital Intensity
continued
client given to brothel owners; health,

safety and moral issues; and the shortterm nature of the work. Many sex
workers work for a few years at most,
Technology & Systems The major use of technology has

of
Technology
Change is L ow
Revenue Volatility
Level
The level
of
Volatility is M
edium
historically involved the computerisation

of membership records, accounts,
transactions and expense payments.
Computers and the internet have allowed
organisations to reduce running costs and
to access members using less labour input.
Online booking of prostitutes services has
become common for larger brothels, as
both brothels and escort services have
capitalised on the discretion and
anonymity of the internet. Overall,
industry use of technology is limited as
computers and software used by the
industry are widely available and cheap to

purchase and maintain, and are unlikely to
increase significantly over the long term.
Small players and escort services
benefit most from new technology and
internet bookings as strip clubs and
brothels still require their clients to attend
their premises. Escorts and independent
workers, however, can organise the vast
majority of the transaction in advance, as
well as prearranging a location to meet.
This increases the safety for independent
workers and improves the experience for
clients of escort services.
Industry revenue volatility is at a high

level as demand for prostitution services
is influenced by changes in household
disposable income, general economic
conditions, consumer confidence, tourism
numbers and industry licensing laws. An
industry slowdown due to the global
financial crisis was followed by a surge in
2009-10, and generally more stable
growth through 2013-14. Many industry
firms rely on advertising to boost an
industry product or to sell a lifestyle,
which can lead to higher revenue growth.

The industry is also affected by
demographic and attitudinal changes,
which can change slowly over time.
Industry revenue volatility is also
being influenced by competition from
potential substitutes, such as
pornography and strip clubs. As
consumers that seek sexual services of
any kind have more opportunities to
spend money elsewhere, changes in
competing services are likely to have a
A higher level of revenue

volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilised
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Volatility vs Growth
1000
Revenue volatility* (%)
Level
The level
achieve a set financial target, and then

exit the industry. The part-time nature
of the majority of industry workers
keeps annual wages low.
Hazardous
Rollercoaster
100
Brothel Keeping and

Prostitution Services
10
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualised revenue growth (%)

* Axis is in logarithmic scale
Revenue Volatility
continued
greater negative impact on demand. To

counter potential declines, more highend brothels are offering additional
services and inducements, such as

24-hour opening hours, complimentary
drinks and VIP evenings.
Regulation & Policy
Regulation is aimed at protecting the

health and safety of both prostitutes and
their clients. Regulation is also intended
to uphold public morality and order.
Regulation that is aimed at health and
safety is not prohibitive of market access.
For example, most sex workers are likely
to obey rules such as the mandatory use
of condoms, regardless of legislation.
Regulation sanctioned by morality is a
little more prohibitive and tends to ensure
that legal sex workers must find suitable
premises, such as brothels, dancing clubs
and hotels, in which to ply their trade.
Over the next five years, health and
safety regulations, and licensing
requirements, are likely to remain heavy.
However, those aimed at public morality
are likely to diminish, or become less
strictly enforced, as sex work is better
accepted by modern generations. This is
largely due to the prevalence of
pornographic material that normalises
sexual services, and the positive effects
of health and safety legislation. Western
Australia, however, has become an
exception to this expectation over the
past five years.
WA prostitution legislation has

changed from its traditional form
which made it unlawful to own or operate
a brothel but prostitution itself was not
prohibited. New laws introduced in April
2008 allow registered brothels to operate
under a certificate issued by the State
Government. This was enacted with the
intent to limit the growth of illegal
brothels. However, the move has met
with resistance, and the newly elected
Liberal State Government has vowed to
repeal the laws. In November 2011, the
government introduced laws into
parliament that restricted brothels to
light industrial zones only.
There are no Commonwealth
Government laws that govern sex work in
Australia, although the Commonwealth
Government does provide some funding
of sex worker support groups through the
health budget. Every state in Australia
has a different system of legislation and
regulation over the sex industry,
comprising street working prostitutes,
escort agencies and brothels. However,
laws tend to be regularly reviewed and
changed in most states over time.
There are no tariffs or government

assistance for the provision of sexual
services. Public programs tend to
concentrate on the health and safety
of sex workers, and most governments
provide some financial support for
such services. The Eros Foundation,
established in 1992, is a national

lobbygroup for the sex industry at
large. Eros has 400 business members
and many individual members. Each
state has a Prostitutes Association
thatrepresents the interests of
prostitute workers.
Level & Trend

he level of
T
Regulation is H
eavy
and the trend
is I ncreasing
Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is N
oneand the
trend is S
teady
28
Key Statistics
Industry Data
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Sector Rank
Economy Rank
Revenue
($m)
204.3
201.6
191.7
207.0
173.8
198.4
206.0
198.4
208.2
213.6
218.1
225.2
233.8
241.0
249.7
19/20
677/722
Annual Change
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Sector Rank
Economy Rank
Revenue
(%)
-1.3
-4.9
8.0
-16.0
14.2
3.8
-3.7
4.9
2.6
2.1
3.3
3.8
3.1
3.6
6/20
313/722
Industry
Value Added
($m)
Establishments
124.3
389
124.3
391
124.0
391
123.8
366
110.8
312
119.8
330
123.1
369
119.2
339
126.8
344
130.8
348
134.5
350
137.9
353
143.3
357
148.0
359
152.7
362
18/20
19/20
629/722
495/722
Enterprises
372
373
372
348
300
317
349
323
327
330
333
336
338
340
343
18/20
420/721
Employment
2,504
2,532
2,496
2,475
2,238
2,224
2,334
2,315
2,389
2,451
2,496
2,527
2,559
2,584
2,621
17/20
542/722
Exports
---------------N/A
N/A
Imports
---------------N/A
N/A
Wages
($m)
66.4
68.6
70.0
73.4
62.9
65.9
69.5
69.7
72.7
74.8
76.6
78.1
79.8
81.5
83.5
19/20
629/722
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Industry
Value Added Establishments
(%)
(%)
0.0
0.5
-0.2
0.0
-0.2
-6.4
-10.5
-14.8
8.1
5.8
2.8
11.8
-3.2
-8.1
6.4
1.5
3.2
1.2
2.8
0.6
2.5
0.9
3.9
1.1
3.3
0.6
3.2
0.8
5/20
7/20
242/722
282/722
Enterprises
(%)
0.3
-0.3
-6.5
-13.8
5.7
10.1
-7.4
1.2
0.9
0.9
0.9
0.6
0.6
0.9
11/20
300/721
Employment
(%)
1.1
-1.4
-0.8
-9.6
-0.6
4.9
-0.8
3.2
2.6
1.8
1.2
1.3
1.0
1.4
7/20
178/722
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
3.3
2.0
4.9
-14.3
4.8
5.5
0.3
4.3
2.9
2.4
2.0
2.2
2.1
2.5
5/20
229/722
Domestic
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Average Wage
($)
26,517.57
27,093.21
28,044.87
29,656.57
28,105.45
29,631.29
29,777.21
30,107.99
30,431.14
30,518.16
30,689.10
30,906.21
31,184.06
31,540.25
31,858.07
17/20
649/722
Share of the
Economy
(%)
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
18/20
629/722
Key Ratios
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Sector Rank
Economy Rank
IVA/Revenue
(%)
60.84
61.66
64.68
59.81
63.75
60.38
59.76
60.08
60.90
61.24
61.67
61.23
61.29
61.41
61.15
4/20
86/722
Imports/Demand Exports/Revenue
(%)
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.
Revenue per
Employee
($000)
81.59
79.62
76.80
83.64
77.66
89.21
88.26
85.70
87.15
87.15
87.38
89.12
91.36
93.27
95.27
17/20
684/722
Wages/Revenue
(%)
32.50
34.03
36.52
35.46
36.19
33.22
33.74
35.13
34.92
35.02
35.12
34.68
34.13
33.82
33.44
7/20
132/722
Employees
per Est.
6.44
6.48
6.38
6.76
7.17
6.74
6.33
6.83
6.94
7.04
7.13
7.16
7.17
7.20
7.24
4/20
332/722
29
Jargon & Glossary
Industry Jargon
ESCORTSEscorts are similar to prostitutes, but can act

as companions for clients at social events and tend to
charge higher rates.
MATCHMAKING SITESWebsites that facilitate
meetings between individuals, often of a sexual nature,
through online communication.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labour; medium is $0.125 to $0.333 of capital to
$1 of labour; low is less than $0.125 of capital for every
$1 of labour.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
Australian Bureau of Statistics implicit GDP price
deflator.
STREET PROSTITUTIONStreet prostitutes are workers

who do not operate in a brothel. They may operate in
locations of their clients choosing, or from home, but
most often solicit clients on the street.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%; medium is 5% to 20%; and high is more
than 20%. Imports/domestic demand: low is less than
5%; medium is 5% to 35%; and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLEAll industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISEA division that is separately managed and

keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
NONEMPLOYING ESTABLISHMENTBusinesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within Australia, regardless of their country of
origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EXPORTSTotal value of industry goods and services sold

by Australian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Australia.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITYThe level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. Benefits and on-costs are
included in this figure.
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Online alternatives: The industry faces growing

competition from web-based substitutes

IBISWorld Industry Report S9534

Brothel Keeping and Prostitution

2 About this Industry

27 Regulation & Policy

18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

Key External Drivers

10 Industry Life Cycle

12 Products & Markets

12 Products & Services

26 Technology & Systems

29 Jargon & Glossary

www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com

Brothel Keeping and Prostitution Services in Australia June 2014

About this Industry

This industry comprises companies that

The primary activities of this industry are

include stripping, erotic dancing, adult

The major products and services in this industry are

H4520 Pubs, Bars and Nightclubs in Australia

writes over 500 Australian

Brothel Keeping and Prostitution Services in Australia June 2014

About this Industry

For additional information on this industry

Brothel Keeping and Prostitution Services in Australia June 2014

Annual Growth 09-14

Annual Growth 14-19

Real household discretionary income

Revenue vs. employment growth

There are no major

Key External Drivers

Business tourist nights

Life Cycle Stage

Brothel Keeping and Prostitution Services in Australia June 2014

Executive Summary | Key External Drivers | Current Performance

Sexual services have historically proven

by 2.6% in 2013-14 to $213.6 million,

Key External Drivers

used when consumers feel financially

Real household discretionary income

Business tourist nights

Brothel Keeping and Prostitution Services in Australia June 2014

Key External Drivers

International travel to Australia

Average weekly hours worked

Real household discretionary income

Historically, demand for sex workers has

with mixed economic conditions and

Industry changes and

While factors such as international

online-based challenges for the industry

Brothel Keeping and Prostitution Services in Australia June 2014

Industry changes and

industry and growth in establishments.

and licensing costs. Employee numbers

Rise of casual sex

Changing social views regarding paid sex

Adult matchmaking websites in

There are now more alternatives to paid

oftentimes free, and its appeal is

Brothel Keeping and Prostitution Services in Australia June 2014