Icqurimage magazine: Downturn drives beauty bonanza

Downturn drives beauty bonanza for lap dancing industry

© Icqurimage 2010

Since that dark day in September 2008 when an iceberg of worthless assets almost sank the banking sector, many affluent employees found themselves overboard and desperately in search of a life raft. As the financial services sector and their dependent industries shed 'surplus staff', some 500,000 in the United States alone, vast numbers of white collar workers were suddenly confronted with the challenge of finding a good living elsewhere. The popular maxim that 'When bills arrive the devil drives' has never seemed more apt amid widespread reports that many well-heeled white collar women have sought refuge within the adult industry, notably in lap dancing clubs. The notion that strip clubs are enjoying a 'beauty bonanza' just as the very industry which fuelled their prosperity has fallen on hard times appears paradoxical. The media has also reported that several major strip club chains are still turning healthy profits despite the fact many once popular venues have closed their doors in Manhattan and Las Vegas. Traci Wilder, Public Relations Manager for the world famous Olympic Garden, informs us that her venue is 'now the only Gentlemen's club on the [Las Vegas] strip and [therefore] enjoys a constant customer base'. Although seemingly contradictory, the prevailing tide points towards a market correction, with the surviving clubs gaining from the closure of their major competitors as the recession drives a very different cross-section of society to seek their fortunes within this colourful and windowless world.

When a business or individual is threatened with insolvency, personal morality often takes a back seat. Given that a woman with a winning smile and a pleasing figure can still expect to earn a six or even a seven figure salary by working as an erotic dancer, it has become a lucrative alternative for those accustomed to more privileged forms of employment. Although lap dancing clubs are still dimly viewed by many in society, the recent bonanza of beautiful and educated young women represents an unexpected social and demographic shift, as well as a welcome tonic for a mature industry. Many club managers have related a surge in the number of applications from white collar women, apparently drawn by the flexible schedules and cash rich culture. Dancers at the remaining upmarket clubs in Manhattan, Chicago, Las Vegas and Miami may still expect to take home between $100,000 and $300,000 a year, despite the downturn. However, the increased competition for revenues between dancers means that not every girl will be able to draw the eyes of a crowd and recoup her nightly outlay. With some clubs receiving dozens of new 'walk in' auditions every week, it is perhaps inevitable that only the most personable and attractive dancers will prosper. Allan Priaulx, Director of Corporate Communications for Rick's Cabaret, kindly informs us that 'Rick's Cabaret has benefited significantly from the economic downturn because, as more women lose their 'mainstream' job, they are more likely to consider jobs in the topless industry. We essentially have a new 'inventory' of strippers. The customers are always looking for a fresh face and a new girl to talk with and we have met that need.'

To verify the widespread rumours that many white collar women have taken up pole dancing to maintain their incomes we approached thirty club operators for their personal experiences. Our survey indicated that 96% of clubs have experienced an increase in the numbers seeking work since 2008, with 85% reporting a discernible rise in the number of applications from students and 92% from 'white collar workers', with only 4% claiming a rise in applications from school leavers. When asked whether the number of dancers they employed had increased, decreased or stayed the same during 2009, 92% said that the numbers employed had increased, while only 6% said that numbers had remained the same. All responding clubs suggested that there had been little change in the revenues of dancers over the past year, although interestingly Allan Priaulx suggested that there may be a growing income disparity between dancers of 'white collar' and 'blue collar' extraction, 'The newer entertainers, especially those who come to us from white collar jobs and have more education and life experience, tend to do very well in our clubs because they can carry on conversations with the customers. The more a guy wants to talk with the girl, the more likely he is to get more lap dances or to rent one of our VIP suites for more privacy.'

The recession has forced some clubs to resort to promotions in an effort to attract a cost-conscious clientele, increasing revenues at the price of margin. For many club owners, busy nights featuring a steady stream of $500 visits to the VIP rooms must now seem all but a golden memory. Despite the decline in the number of big spenders, the clubs' prudent operating structure (in which dancers are effectively self-employed and required to pay a house fee of between $40 and $200 to work a given night) ensures that overheads are kept to a minimum while operating margins are maintained above 50%. This strategy passes on much of the risk to the dancers, and means that a quiet period doesn't necessarily lead to a club having to close its doors.

Given the broadly private nature of club ownership and the number which have since closed down, it is difficult to gain access to financial data for much of the industry. However it would certainly appear that the two strip club chains that are publicly traded have strongly bucked the downward economic trend. While the share price of VCG Holdings is down from a peak of almost $14 in December 2007 to just over $2 today, the company still declared revenues of $57 million for the financial year ending 2008, up 41% on 2007. Although some expect VCG's financial statements to Dec 31st 2009 to report a fall from a net operating profit of $30.7 million in Dec 2008, the impact of any economic downturn upon revenues remains to be seen. In comparison, VCG's only publicly traded rival, Rick's Cabaret International (RCI), disclosed that sales at its nightclubs in January 2010 were up by more than 20% on the previous year, following the trend set by the figures for December, suggesting that the long awaited recovery is materializing, at least within the lap dancing sector. RCI further reported a rise in their annual revenues (through Sep 2009) to $75 million, up 25% on 2008 and a massive 134% improvement on 2007, the month the financial crisis originally erupted. Such buoyant news has sent RCI's share price soaring to over $11 from a low of $2.44, in spite of the prevailing bear market. As a further sign of confidence, RCI is reopening many of their existing clubs and has acquired new outlets in Austin and Fort Worth. Quarterly revenues to the end of 2009 were up 16.8% to $20 million, achieved largely from a 14.5% increase in earnings from existing clubs pooled with revenues from their new locations in Texas. Far from being bitter rivals, RCI and VCG Holdings have just signed a letter of intent to merge their operations, thereby slashing costs and extending their combined strength across the entire continent. This would in effect give rise to America's largest strip club operator with over 38 venues and combined revenues in excess of $131 million. With prospective gains from consolidations in major urban markets and resulting economies of scale, expect both sales and profits to increase dramatically through 2011. It would appear that the rumours of a resurgence in the fortunes of the lap dancing industry were well founded. Just as many adult content producers and publications are going to the wall, the strip club industry seems to be alive and kicking. Such divergent trends would suggest that the lap dancing industry is a unique market phenomenon whose performance and profitability should be treated as being entirely independent of that of other mainstream adult media.

Despite the well publicized difficulties at Playboy and the collapse of several small adult studios, there has been a veritable flood of applications from former white collar workers to the adult film industry. In fact the number of actresses working within the industry has nearly doubled since 2007 to some eight hundred. However, unlike the strip club sector, revenues from adult film and media are now insufficient to support the once astronomical salaries enjoyed by many adult models and film stars. As for the lap dancing industry, this is one niche of adult entertainment that appears to be here to stay...