There were 22 legal brothels open in Queensland by June 30 - the lowest number in the state since 2005-06.

Prostitution Licensing Authority chairman Marshall Irwin said the state's sex industry continued to be highly competitive with challenging economic conditions.

For most of 2014-15, there were 27 licensed brothels, the highest number reached, although the year closed with 26 brothels operating.

But during the past financial year, five brothels closed - although one reopened - with 22 legal brothels still open at the end of June 2016, according to the Prostitution Licensing Authority's 2015-16 annual report.

"If the information provided to the PLA is accepted, whilst some brothels are highly profitable, others struggle financially, belying the common perception that brothels are a 'licence to print money'," the report reads.

Denise Rogers, owner of Silks on Upton on the Gold Coast which opened in 2002, said she would never open a legal brothel today due to poor economic conditions and a proliferation of illegal operators.

"Five years ago I wouldn't have said that but now, definitely, if anyone asks me 'should I open a brothel?' I'd say no, there's no money, we battle to make ends meet," Ms Rogers said.

"You've got to be crazy to open a brothel now."

Ms Rogers said it cost about $40,000 in fees to open a brothel and managers also had to buy their own licences.

"It's ridiculous all the things we have to do - it's like hitting your head against a brick wall," she said.

"You've got no choice but to do the right thing. But really, if you have any sense about it, you wouldn't be in a legal brothel."

Ms Rogers said legal brothels had to compete against illegal operations, where they did not pay for licences and fees.

"It's got worse - there's little rub and tug parlours everywhere," she said.

"You close it down and they go open around the corner."

The annual report says that most prostitution in Queensland happens outside of licensed brothels and the contraction of the licensed sector jeopardised the achievements in the Prostitution Act.

"Especially given that licensed brothels are acknowledged as providing the safest and healthiest environment for sex work," the report says.

But the authority is predicting brothel numbers will stabilise in the next year.

Issues affecting the decision to remain in business included economic conditions, return on investment compared to other businesses, entrepreneurial ability and regulatory framework, according to the annual report.

Competition with illegal operators - who did not have the same overheads or regulatory burden - and with sole operator sex workers was also listed as an explanation for the size of the licensed brothel industry in the report.

Mr Irwin said in the authority's 16-year history there were no confirmed instances of the infiltration of organised crime, official corruption or human trafficking at any of the state's licensed brothels.

He attributed this to the authority's close scrutiny of applicants and monitoring of the state's licensed brothels.

"Licensed brothels provide a safe and healthy environment for the conduct of prostitution, with the PLA promoting high standards of health and safety and prioritising the autonomy and freedom of choice of sex workers," he wrote in the report.

More than 200 towns in Queensland have received approval from the government to prohibit brothel development applications within their area.

The authority received 30 complaints in relation to prostitution issues in the past financial year, with 15 about the operation of licensed brothels.

To be approved, brothels must have no more than five working rooms, be more than 200 metres from a primarily residential area and more than 200 metres from a residential building, place of worship, hospital, school, kindergarten or any other place regularly frequented by children for recreational or cultural activities.

Stay informed. Like the Brisbane Times Facebook page.