Ladysas
Not all places charge to hold showcases, but many do. My studio which is an independent instructor studio, charges about $50 and you have the option to buying a video of the event. Not much of a money making venture there AND they provide wine, sodas and finger foods. Maybe it helps cover the light bill/rent for the summer months when dancers go on vacation.
Those who are more advanced dancers request to do spotlight daces at a social dance to work out any last min kinks of a routine they are showcasing. Dinner dance events are thrilled when they can get in a spotlight dance like this. I have never heard of a studio pushing unprepared students into this and I too would object.
Doing a showcase can be a working tool to improve your dancing. Generally your instructor takes your weakest dance to do a showcase around. The idea is solid concentration on this dance to increase speed, improve technique, "fluidness" - or what ever is needed.
It's not easy to get out and perform in front of an audience the first time. However, doing a showcase in-house you are among friends and fellow dancers to give you support. What's the worst that can happen? You trip? - I've done that, count it great by not going down. You get a heel caught in your skirt? - Seen that a few times, teaches one how to be cool under pressure and not lose balance as you extract it. You have a brain fart and forget a section/step of your routine? - I've done that and I've seen that, you just keep going. The audience does not know your routine. You do a lift and as you slide down your partner's front you get a painful wedgie? - Happened to my instructor's wife and they are 5 time rhythm champions - so see, even champions have to deal with problems. When it's over you discover you didn't die. Look, you are among an elite group of folks who have put themselves on the line for others and you have reaped the benefit of improving your dancing, having a good time and entertaining others. You will see that improvement flows into your other dances - AND it's a wonderful confidence builder.