Social attitudes constantly change, and it wasn't so long ago that strip clubs were the very last place to be seen. Once located exclusively ‘out of town’ or tucked away within tourist black spots and back streets, no gentleman of reputation would have cared to be observed walking through the doors of a strip club. Today, visiting a gentleman’s club is widely perceived to be a normal and essentially harmless form of entertainment. While this is certainly not the case in the eyes of many feminists or social activists, it appears to be the view on Wall Street as two major chains of strip clubs, VCG and Rick’s Cabaret, are now traded publicly. Over the past few years the earnings of these two companies have continued to rise and their share prices have soared. While a recession may be dawning within the wider world, as far as the sex industry is concerned trade is always brisk if not booming, leading many investors to consider the adult industry a safe haven.
The revenues of VCG and Rick’s Cabaret have more than doubled over the past two years, driven by ambitious expansion plans and improved earnings at existing locations. However selling strippers to club patrons is much easier than selling sex to investment fund holders who carry the reputations of their institutional investors. Historically Las Vegas and the sex industry were the first ports of call for the mafia at the end of prohibition as they sought to invest their profits gainfully. Such shady origins made promoting strip club chains to Wall Street investors a hard sell. However, the promise of unparalleled returns on investments, and a more sober and sophisticated product that emphasized glitz & glamour rather than sex & nudity, was sufficient to sway the doubters, especially given the industry’s widely held resistance to recession. While cosmetic surgery and second homes are luxury goods whose demand soars during times of prosperity, sex is very much a basic commodity whose demand is not as vulnerable to economic cycles.
The swinging corporate mood is catching. Baywatch icon Pamela Anderson recently announced plans to establish her own chain of strip clubs called Lapland, presumably after her Scandinavian ancestry. Even Los Angeles’ sacred Regent Square area is soon to play host to the Skin Cabaret, which successfully circumnavigated local adult entertainment restrictions by chopping seven feet off the side of its building. Many activists claim that strip clubs attract crime and prostitution into respectable neighborhoods, although others insist that they have little adverse affect upon the communities which host them. In fact, many small companies located close to such clubs argue that the custom they attract is of benefit to surrounding businesses and local house prices. Such debates aside, what is clear is that a fresh wave of strip clubs are opening in almost every city across America and the UK, only this time the growth is being fuelled by corporate investors rather than by private concerns.
Nowhere is the new found acceptability of the adult entertainment industry more evident than at Rick's Cabaret in midtown Manhattan. Here groups of businessmen recline in leather chairs, drinking complementary cocktails as they watch a new breed of women pay their way through college or the lower ranks of professional life by erotic dancing. This most recent addition to the empire cost some $11 million to acquire and refurbish and, although it is by no means their largest club, it is certainly their boldest attempt yet to enter the highly lucrative corporate sector. Shares in Rick's Cabaret International (RCI) recently traded at a 52 week high of $11.41 as recent profits suggested no downturn in the public appetite for the erotica served up at their fast expanding chain of fourteen clubs. RCI have declared an ambition to open fifty clubs across thirty cities once their current cycle of consolidation and investment has been completed. The Houston-based company reported a 24% increase in revenues for the three months ending in March 2007 ($7.57 million), with earnings of $29 million for the year ending in June.
By keeping the image of their clubs spotless and ensuring the safety and security of their customers, the new corporate strip club barons are cleaning up the image of their industry. RCI’s main rival VCG owns eight strip clubs and manages five others under a range of brand names across the plains of middle America. With 2006 revenues in excess of $17 million and projected earnings of $40.8 million for 2007, it may even be outperforming its main rival. As VCG continues to expand, its operating profits are forecast to increase from $8.6 million in 2007 to $18.2 in 2009. Profitability aside, perhaps the real revolution lies in the new transparency that these corporate chains bring to a once veiled industry. As they are now publicly traded, unlike Scores and other upscale gentlemen's clubs, they must keep their act clean, and that includes the balance sheets. For the first time in history, strip clubs are required to disclose detailed accounts and to declare their actual cash revenues to their public investors.
What was once the cream of cash industries with a widespread skimming of taxable revenues, is fast evolving into a corporate commodity in which investors want to know exactly how much cash is generated and where it flows. In revolutionary terms, this means more tax for the government, a greater return for investors, and cleaner profits for club operators. Such financial transparency provides an unprecedented insight into the inherent profitability of the strip club industry, with most city venues earning between $2 and $5 million a year. This gives the top thirty clubs in the United States a combined valuation of between $700 million and $1 billion. Although privately owned clubs may ‘take home’ more money, raising the capital to buy or refurbish them is far easier for publicly traded corporations than it is for private concerns. Indeed, RCI recently announced major acquisitions across the Southeast and in Philadelphia. This means that the new corporate tycoons are able to expand more rapidly than their privately funded rivals, although the recent credit crunch may cool their heels a little.
Exotic dancers were once widely stereotyped as prostitutes from the wrong side of the tracks, apparently more interested in acquiring someone else's husband than in developing a traditional career. Times have most certainly changed as increasing numbers of students and young professionals take up exotic dancing as a means of paying their way through college or the basement end of a developing career. Today’s dancers tend to be employed as independent contractors, paying the club for access to pole time and floor space. Such an arrangement puts a comfortable ceiling on the club’s wage bill and benefits, while ensuring that the dancers get to keep most of their tips and earnings. In exchange for the provision of a safe haven, gentlemen’s clubs are able to entice their patrons with a feast of ‘eye candy’. Although only 10% of their revenues currently derive from dancers’ house fees, the girls attract a constant income stream into the clubs in the form of drinks, food, and entrance fees.
The owners and the dancers are not the only business people who frequent such venues, as the city's white collar workers spend much of their time networking and even holding ‘formal’ meetings in clubs like Scores or Rick's Cabaret. While their female colleagues may consider it unfair and discriminatory for their male co-workers to fraternize within such establishments, often taking their own clients with them, it is still a tax deductible business expense according to the Inland Revenue. Indeed this white collar trade is so lucrative that the manager of Rick's Cabaret in New York estimates that Wall Street executives currently contribute at least a third of their turnover.
As businessmen become regulars at strip clubs, they often build up intimate relationships with individual dancers who may offer them more than just sensual gratification and physical beauty. After years of dysfunctional marriages, many men find a sympathetic ear for their personal and professional problems. A dancer’s intellect and personality count for much in the modern club world, as businessmen seek a companionship that extends beyond the flesh. For some patrons, exotic dancers have become surrogate mistresses, friends, and sometimes even lovers as they seek to escape their high pressure lives and suffocating marriages.
It appears that even the police are far from immune to the heady mix of strip clubs, sex and money, as several Seattle officers were recently accused of mixing business with pleasure while working undercover at local strip clubs. Eight dancers were arrested at the Déjà Vu in Seattle in March of this year for illegal dancing (exotic dancers may strip nearly naked while on stage, but not off stage, and may not touch their customers), and more than a dozen more at Rick's in Lake City last December. Undercover officers were sent to ascertain whether the club's dancers were soliciting prostitution. Their methods however appear to have been somewhat unorthodox. Police officers are accused of having become unduly tactile after dancers allegedly contravened the law by exposing their genitals and touching the police officers. Some officers spent a further $100 of taxpayers’ money after the girls allegedly broke the law during the first lap dance, and other officers undid their belt buckles. There were also questions as to whether twenty-five police officers were really necessary to arrest eight dancers who may have broken the law in a single raid. However, of the twenty-two dancers who were arrested during this series of raids, three were later held on suspicion of prostitution. Clearly, when attractive girls dance naked for men with money, it is very difficult to keep sex out of the equation...