A Huff St resident, who doesn't want to be named, says there were several Asian women working as escorts in an apartment building on the street.
They were "very busy", he says, speculating there would have been "tens of thousands of dollars" going through the business each week.
Immigration NZ responded to an anonymous tip, visited the property and served two foreign nationals with deportation notices.
NZPC founder Healy says sex work is the only occupation you can't do in New Zealand if you're a migrant here on a work visa.
She says that restriction, alongside the tough bylaw, can make migrant sex workers reluctant to seek support if they have issues or become victims of crime.
"It is quite worrying for us," Healy says.
"We certainly don't want people being shut away from accessing support."
She says strict bylaws like Queenstown's are based on a "bogeyman" fear, rather than reality.
"Sex workers are obviously not there to entertain people under the age of 18, it's an adult activity, like a lot of activities are."
Under the council's Brothel Control Bylaw 2017, brothels also can't be located in the ground floor of a building, or within 100 metres of another brothel.
Queenstown mayor Jim Boult says he personally doesn't support brothels, but admits they do provide a level of security for sex workers.
He doesn't believe the bylaw is too restrictive.
"I think we are a family-friendly holiday destination, we've got strong community values, and I think most people support the bylaw."
Queenstown's council says it received one other complaint about an illegal brothel last year, in June.
In that instance, they investigated but found it was operating legally.
Back in 2015, council staff investigated reports of an illegal brothel operating on Melbourne St.
The last long-running brothel, Candy's, closed in 2008.
But the Huff St resident says he believes an escort service may once again be running from the Huff St building.
He believes they were advertising on a popular escort website.
As of this week, there are four women based in Queenstown offering escort services on the website.
He says INZ officials visited the unit occupied by the women late last year, and them women left soon after.
Compliance assistant general manager Peter Devoy says migrants who are not NZ permanent residents are not permitted to work in the industry.
"The district council advised the address was not a registered brothel.
"In October, INZ compliance officers visited the property and located two foreign nationals who were working unlawfully in the sex industry. Both were served deportation liability notices."
- Mountain Scene
