The sex industry in Queenstown and Wanaka is booming, despite being pushed underground by 'draconian' bylaws.

More than 350 suspected foreign sex workers have tried to enter New Zealand in the past three years and 38 have been kicked out the country.

Immigration New Zealand (INZ) compliance assistant general manager Peter Devoy said between July 2015 and October 2018, 353 suspected or known foreign sex workers were refused entry to New Zealand, while another 28 were taken off aircraft, or denied boarding, before travelling.

During the same period, 38 people on temporary visas were found to be engaging in sex work in New Zealand and were issued with deportation liability notices.

STUFF Two Chinese nationals on visitor visas working in an illegal brothel in a Queenstown suburb were busted in October and deported. (Stock image)

Two Chinese nationals on visitor visas working in an illegal brothel in suburban Queenstown were among those deported.

INZ was alerted to the illegal brothel operating out of a Huff St property by an anonymous tip off, Devoy said.

"The [Queenstown Lakes] district council advised the address was not a registered brothel. INZ's interest was in the people working at the Huff St property."

In October, INZ compliance officers visited the property and found two Chinese nationals on visitor visas who were working unlawfully in the sex industry.

"Both were served deportation liability notices."

The Prostitution Reform Act 2003 does not allow migrants who are not New Zealand permanent residents to work in the industry.

The rule intended to "remove any incentives for ... vulnerable people to enter New Zealand for the purpose of providing commercial sexual services", Devoy said.

"It's for the Government of the day to decide if the Prostitution Reform Act should be changed in any way, that's not something we can comment on."

The Queenstown Lakes District Council said it would respond to questions on the issue through the Official Information Act process.

Factions of the sex industry have criticised tough bylaws restricting where brothels can legally operate in towns like Queenstown and Wanaka.

The district council has kept its main towns brothel-less through restrictive and "draconian" bylaws since prostitution was decriminalised in 2003.

New Zealand Prostitutes' Collective co-founder Dame Catherine Healy previously said bylaws such as Queenstown Lakes' were unduly restrictive, inhibitive and pushed the sex industry underground.

A Queenstown businessman involved in adult entertainment said there was huge demand for brothels and the council bylaw, as well as conservative landlords, were driving the sex industry to private properties and motels in the region.

"There are currently between five and 35 girls working in Queenstown any one time. Most are Asians brought in and pimped out," he said.