No problem with the questions. Speaking with confidence on matters about which I am only partially informed is an important part of what I do for a living!
But fwiiw, I also find the hostess club phenomenon puzzling and surprisingly popular. I.e., I wonder about it in much the same way you do. That said, my best understanding is that hostess bars are not selling sexual stimulation primarily, rather they are selling the pleasures of female social companionship. Basically hostesses act the way drunk men wish beautiful women would act. They focus their attention on you, laugh at your jokes, listen sympathetically to your problems, try to make you laugh, smooth over any rough spots in your interactions with other guys in the group (going to hostess bars is largely a group activity as far as I can tell), praise you for any possible reason they can discover, keep you at that "happy drunk" level of inebriation, sing karaoke with you or for you or applaud your singing etc. In short a hostess bar aims to send you home feeling good about yourself socially...feeling that you are charming, popular and attractive.
Hooking up with a hostess outside of the bar is definitely not the norm, but some hostesses do it with one or a few favored customer(s), and perhaps that is a largely illusory "carrot" that motivates many customers. I'm not at all sure though.
If others can explain it better or differently, I'd love to hear other takes on GD's questions...which are also mine.
-Ww