Where have you gone, Wladziu Valentino Liberace?

FORTUNE -- In a city struggling with 14.3 percent unemployment, a tourist trade more interested in gambling and big-name shows than museum-going and a location in an untenanted shopping plaza, any museum faces a tough challenge.

That may be why it's tough to get anyone in Las Vegas away from the strip -- call a cab to the Liberace Museum and four cabbies ignore the request. Too far away, too much trouble.

And that may be why the Liberace Museum, after 30 years in business, will close October 17, it was announced recently. It once drew 450,000 visitors a year, but barely 35,000 in 2010.

Don't worry, the capes aren't disappearing: Elements of the collection will likely be seen again as early as 2011, said Amy Noble Seitz, president of Exhibit Development Group, an Illinois-based company that has been assessing the collection for the past two years and which just signed a contract to start touring the materials.

"We have 12 fine arts, history, musical instrument museums and cultural centers interested," she said. "Everything in this collection is amazing. When you create an exhibit, you're creating a storyline and a context. Liberace was really generous and gentle."

The collection includes rhinestone-encrusted luxury cars, feather and bead capes, exquisitely inlaid antique pianos, dazzling jewelry and knee-high boots, all the former property of "Walter" Liberace, whose campy performances once made him a household name. He died of AIDS in 1987.

In the 1950s, Liberace earned a staggering $55,000 a week for his piano playing, and won a spot in the Guinness Book of World Records as the world's highest-paid keyboard artist. His television and concert appearances were legendary for his showmanship; the collection even includes the scary-looking leather and metal harness used to fly him high over audiences' heads.

Today, few have heard of him and even spending $300,000 a year on public relations firms and events to "re-brand" him was in vain, said Jeffrey P. Koep, chairman of the Liberace Foundation and dean of the college of fine arts at the University of Nevada at Las Vegas. "The bloom was fading," said Koep, a 10-year volunteer member of the eight-person board running the Foundation.

Like many in Las Vegas, the museum, (which is run by the foundation), is saddled with a crippling mortgage. The plaza was fully paid for, but in 2000 the museum took out a $2 million mortgage to renovate the museum's two one-story white brick buildings. The 30-year note carries a crushing 9.5 percent interest rate -- and a penalty for pre-payment that requires paying off all the interest, Koep explained.

The museum was hit with the sorry trifecta of declining revenue from the use of Liberace's intellectual property, (bringing in $25,000 a year, formerly 10 times that amount), declining museum attendance (tickets are $15), and an empty plaza whose many storefronts once brought in rental income.

"Las Vegas is filled with plazas like this one," Koep said.

The collection, a testament to early bling, offers a diamond-encrusted ring in the shape of a grand piano, a gift to Liberace from Barron Hilton (Paris' great-grandfather, the hotelier), an opal ring the size of a baby's fist, dozens of his 400 ostrich and beaded and sequined capes, some weighing 200 pounds, one worth $750,000. The cars include a 1962 Rolls Royce covered in mirror, and a 222-year-old piano, whose twin is in the Metropolitan Museum of Art.

Turning off the A/C (and lights) to save arts scholarships

The foundation's endowment, which is unrestricted and has been dwindling as a result, has given away $6 million to 2,700 arts students nationwide; this year eight institutions received $60,000 -- five years ago $250,000 was more typical, Koep said.

Shutting the museum will save $400,00 to $500,000 a year -- on everything from air-conditioning in a city where summer temperatures routinely top 100 degrees to the salaries of its 30 employees, half of them full-time. In short, the foundation's true mission, to help talented students pursue arts careers, is trumping the costs of keeping its ailing flagship -- the museum -- afloat. At least for now.

The foundation continues to seek a new, more central location, said Koep. "We don't see the museum going away," he said.

In the meantime, three part-timers, who spoke to Fortune.com on the condition of anonymity, said they were hurt and angry at losing their hourly-wage jobs with only six weeks' notice. All retirees in their 60s, they face a difficult job market. One woman said her husband, in his 50s, had searched four years for a job until finally being hired this month -- part-time without benefits -- as a casino usher.

Visitor Cecilia Concepcion, a resident who has been bringing visitors to the museum every year for six years, was saddened to hear of the closing. "I think the museum is fantastic. I'm sorry they're going to close it, No one really understood him. Through the museum, I've learned what a generous man he was. You really need to hear his story."