Adult entertainment outlets spreading around Auckland's new SkyCity red-light zone have upset a woman whose family have close links with the Palace Hotel, about to become an adult entertainment club.

Michelle Clarke was reacting after Wellington sex industry leaders the Chows paid $3.3 million for the pub on the Victoria St West/Federal St corner.

They are renovating it and hope to open next year, taking advantage of the proximity to the casino and its Asian clientele.

John Chow said he was working with an international adult entertainment company to create a project which he said would be "a first in Australasia", and Michael Chow said he wanted to re-establish Wellington CBD, including Vivian St, as the premier adult entertainment strip.

The suburbs were not the place for the sex industry, he said.

Across Hobson St, Louis Yang of JC Pacific Trading is project-managing a $1.5 million fitout of the Gold Coast Health Spa, advertising for massage staff.

It has already built a 10m x 5m indoor pool, separate men's areas, a corridor of massage rooms and VIP suite.

Miss Clarke said the Palace was special to her family and its new use seemed wrong.

"I grew up in that hotel, which was originally called the Aurora Tavern, from birth until I was 16 years old.

"It was obtained by my great-great-grandfather Patrick Gleeson and passed to his daughter and then my grandparents Alec and Rita Kerebs and run as a family pub, also by my parents, until the late 1970s when we had to sell and move on.

"If we still had money or I won Lotto, I would love to buy my old family home and turn it back into a hotel again.

"I find this so upsetting to have this happen, and especially in the middle of the city.

"What is happening to Auckland and New Zealand?"

Other adult entertainment clubs in the area are De Boss Club (open 9pm-late) and A Salon Chinese Massage, next door to each other in the block spanning Albert St-Federal St opposite SkyCity.

The central business district had about 16 licensed brothels last year as well as many illegal ones operating from apartment blocks, which upset residents.

While prostitution has been legal for years, large brothels must get Auckland City Council consent to operate.

Small, owner-operated brothels don't need a licence if the operator lives on the premises and employs one person in a residential property without negative impacts on the area.