In Nevada, where legal brothels have operated since the late 19th century, business is suddenly a bit slow. George Flint, director of the Nevada Brothel Owners' Association, said revenue at the 25 legal bordellos for which he lobbies is down 25% to 45%, depending on the location. "We used to say Nevada was immune from recession," Mr. Flint said. "Not anymore."
One culprit, he said, is diesel. U.S. retail diesel-fuel prices jumped 16.6¢ in the past week to a record high of $4.50 a gallon, according to the federal Energy Information Administration. In rural southern Nevada towns such as Indian Springs, diesel has hit $5.25 a gallon, Mr. Flint said, which means that fueling an 18-wheeler can now cost an independent trucker more than $1,000.
"An awful lot of our customers are truckers," he said. "It's the disposable income factor: Money for new wristwatches and gettin' laid just isn't there."
Discretion is the other issue. A law dating to the 1970s forbade Nevada's legal brothels to advertise outside the immediate areas in which they were located. That meant that despite the millions of tourists pouring into Las Vegas and Reno, Nevada's legal brothels, those customers' wallets were going untapped.
Legal to advertise
That law was struck down in federal court last July, when an American Civil Liberties Union challenge was filed on behalf of several brothels and local newspapers arguing the First Amendment protected commercial free speech too. But many legal-brothel owners are worried their freedom to advertise will enrage community leaders and push the Legislature to ban legal brothels. "Several of the people who run brothels thought it would be this horrible thing that would happen," said the ACLU lawyer Allen Lichtenstein, who persuaded the federal court to reverse the ban. "But from the government, the silence is deafening."
The politicians' quietude might be owed to the fact that Nevada is now facing a $1 billion budget shortfall. Legal brothels' annual revenue is estimated by Mr. Flint to be $35 million to $50 million, with an overall economic impact of $400 million on the state economy. (The average rural brothel customer spends $175 per visit, while urban brothels see $600 per customer, he said.) Gaming revenue in the state is down too. MGM Mirage's stock price has been slashed in half, sliding from $99.75 last October to $50. And at Harrah's Las Vegas casinos such as Caesars Palace, Rio and Bally's, gaming revenue among VIP and avid-use customers are down 5% and down 8% so far this year among retail and unrated customers, said Harrah's spokesman Gary Thompson.
Mr. Flint said Nevada's previous governor, Kenny Guinn, torpedoed an effort to place a $2-per-customer levy on brothels because "he didn't want to have a 'sex tax' as his legacy." But in addition to the corporate taxes they do pay, a "sex tax" is actually something Mr. Flint said many brothels would welcome, because it would legitimize them in the eyes of the Legislature and the public.
But Ben Kieckhefer, a spokesman for Gov. Jim Gibbons, said: "The governor believes increasing the tax burden on individuals and businesses that are already struggling to stay afloat during an economic downturn is the wrong way to address the state's budget shortfall. ... This would include a tax increase on brothels or any other industry."
"We're second-class citizens," said Jeff Arnold, owner of Donna's Ranch in Battle Mountain. "It's foolish to put up billboards that only irritate more than they attract."
So despite his newfound freedom to do so, Mr. Arnold hasn't purchased any outdoor advertising and criticized a move by Wild Horse Adult Spa and Mustang Ranch general manager Susan Austin. She purchased eight billboards along various highways in and around the city of Sparks that declare, "The party's at the Wild Horse!"
She disagrees with Mr. Arnold.
"We do have a moral responsibility to the wider world," said Ms. Austin, a former prostitute turned madam, adding, "I wouldn't want my children to see something inappropriate. But these [billboard ads] are just little cartoon horses."
But while they are not advertising as Ms. Austin has done, many legal owners are marketing nonetheless, with offers such as casino-style VIP programs that "comp" frequent customers and offer barbecues for truckers and other passersby. Explained Mr. Flint: "'Get your card punched, and the 10th visit is free.' Or free buffets, so you can come and have a nice roast beef dinner with the girls."
Added Mr. Johnson: "We market Donna's as a home away from home for truckers. There's always free chili, ham and beans, and corn bread. And they respond to it. We'll hold a barbecue, and they're the ones who are flipping the burgers."
Mr. Arnold acknowledged that aside from what he jokingly describes as his "Subway sub club card" program, his strategy has been one of sponsorship marketing rather than overt advertising. His second Donna's Ranch, in Wells, is the major sponsor of the town's car show and is the secondary sponsor of its senior pro rodeo. Others, such as Dennis Hoff's Moonlight Bunny Ranch, have gotten free exposure via Hollywood: Mr. Hoff's brothel has been featured on HBO's reality series "Cathouse" since 2005.
But unlike many of Mr. Flint's members, Mr. Arnold doesn't favor a sin tax on Nevada's bordellos. "If the state has fallen short, they need to cut back," he said. "We're getting nailed."