Nona Hendryx from 1970s girl band Labelle says she first met Bette Midler at the Continental Baths in the Ansonia Hotel as reported by the New York Post:
It was a gay bathhouse that would have artists come and play there while guys watched wrapped in their towels -- or not! I think that's where she developed the moniker "The Divine Miss M."
In 1971 Bette Midler entertained the gay boys on weekends at the Continental Baths, and Barry Manilow accompanied her on the piano as reported by Instinct Magazine. The recently-out Manilow laughingly noted the absurdity of the Divine Miss M "performing in front of guys with towels on," and said "she would sing The Star Spangled Banner and they would all get up and the towels would drop and she could check out the merchandise."
Steve Ostrow, the owner of the iconic Continental Baths which operated at 230 West 74th Street in the Hotel Ansonia from July 1969 to 1976, has written his memoir Live at the Continental, and he alleges that the Colombo family provided his gay bathhouse with protection from a rival mob family after he agreed to install its vending machines on the premises.
Further reading that may be of interest: