Indulge Me NZ owner Antonia Davison-McDonald said her striptease company had lost 80% of bookings because of Covid-19.
Australians on stag dos, hens’ parties and lads’ weekends would use her agency to hire topless waitresses and book stripteases by men or women.
The lack of bookings meant five of her staff had moved away from Queenstown because they could no longer afford to live there.
Ms Davison-McDonald said her staff worked for Indulge Me NZ as a second job to help pay rent or fund their lifestyles, and in some cases the pandemic meant they lost their main jobs.
She and others in the wider adult industry said Christmas tended to be a quiet period, but her business was still recovering from the loss of earnings in August - normally the busiest time.
"This year was terrible; last August we had 26 bookings and this year we had five."
Small groups of wealthy Australians normally paid to have women work at a large property they had rented, whereas New Zealanders booked fewer staff and for shorter periods.
However, high-end escort business Bon Ton has decided to open in Queenstown.
Jennifer Souness, who started the agency in Wellington, said without Covid-19 she would have no problem with demand, but wealthy foreign tourists were shut out by restrictions so her business did not take bookings until September.
After initially struggling to recruit because of advertising issues with Trade Me, she received a flood of applications from women "who love sex" and wanted to earn money, but Christmas had proved lean.
"Speaking to my friends who have agencies in different cities they have told me business is great, but Queenstown is different."
She felt the transtasman bubble would be "huge", as her firm did not look to cater for the mass market.
One independent escort, who wished to remain anonymous, said she had built up a steady number of clients since moving to Queenstown in November, mainly from the older, resident population.
New Zealand Sex Workers’ Collective national co-ordinator Dame Catherine Healy said sex work in general had been made difficult in Queenstown through a "hostile bylaw" that was out of step with the rest of the country, and there were few resident sex workers.
She said sex workers continued to tour the South Island, including Queenstown, but only stayed for a few days while proactively seeking clients.
"It’s certainly business as usual, but Queenstown is a tourism town and so sex workers will rely on domestic people to visit them."
Dame Catherine said the bylaw, which had by and large prevented brothels, created "situations that can be quite menacing".
However, she thanked Queenstown police for prioritising the safety of sex workers.
Queenstown’s last long-running brothel closed in 2008, although illegal ones have been found since.
The Brothel Control Bylaw 2017 banned brothels from being on or below the ground floor of a building, within 100m of another brothel or in certain areas of Queenstown and Wanaka’s CBDs.
