Morgans Hotel Group (MHG) is part of a growing trend of staying in boutiques rather than shopping in them. The company owns (wholly or partially) and/or manages about a dozen luxury boutique hotels in high profile markets such as New York; Los Angeles; Miami; San Francisco; and London. MHG also manages hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico. The design of each location reflects its environs, and all feature upscale restaurants and bars. Hotel brands include Delano, Clift, Hudson, Mondrian, and Royalton, while restaurant and bar brands consist of Asia de Cuba and Skybar, among others. The company developed its first property, Morgans on Madison Avenue in New York, in 1984.
Though its 2010 revenues remained somewhat stable and its income increased slightly, MHG maintained a net loss that year as it continued to feel the negative effects of the economic downturn, as well as the loss in value of its Hard Rock Hotel & Casino joint venture in Las Vegas. The Hard Rock completed an ill-timed large-scale expansion project in 2010; it subsequently had difficulty booking the new rooms at profitable rates. As a result, in 2011 MHG divested its minority ownership stake in the property. (MHG had purchased the Hard Rock in 2007 for a whopping $770 million. In order to finance the deal, it formed a joint venture with DLJ Merchant Banking to own and operate the property.) It made the divestiture in order to focus on what it calls an "asset light" strategy of developing its hotel brands in growing markets.
In further efforts towards its "asset light" goal, later in 2011 MHG sold two of its New York City hotels -- the Morgans hotel and the Royalton -- to FelCor Lodging Trust for $140 million. It next sold Mondrian Los Angeles to an affiliate of Pebblebrook Hotel Trust for some $137 million. It used some of the proceeds from the sales to repay debt, and continues to operate the hotels under management agreements. About half of its properties are partially-owned, and MHG's decision to sell these properties is a step towards adopting a business model that focuses on hotel management rather than ownership.
Its strategy of developing MHG brands in growing markets includes the launch of Mondrian SoHo, which opened in 2011 and represents its fourth hotel in New York. The company also plans to manage several additional hotels outside the US, to be developed by third-parties. These development projects are in various stages of financing, and are located in Cabo San Lucas, Mexico, on the Aegean Sea in Turkey, and in Doha, Qatar.
Meanwhile, the company has been expanding its food and beverage operation. In 2011 MHG acquired the remaining 50% share that it didn't already own in its food and beverage joint ventures from China Grill Management for about $20 million. Later that year it purchased a 90% controlling interest in The Light Group, a food and beverage company that operates venues for MGM Resorts International.
The Yucaipa Cos. owns about 30% of MHG. – less
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