COMPANY OVERVIEW December 2008
FORWARD-LOOKING STATEMENTS Certain statements in this presentation and our response to various questions may constitute forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as expects, plans, estimates, projects, intends, believes, guidance, and similar expressions that do not relate to historical matters. Such forward-looking statements are based on current expectations and involve certain risks and uncertainties. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forwardlooking statements is contained in the Company s Annual Report or Form 10-K for the year ended December 31, 2007 and in other reports filed with the Securities and Exchange Commission. All forward-looking statements in this presentation and our responses to various questions are made as of the date hereof, based upon information known to us as of the date hereof, and we assume no obligations to update or revise any of the forward-looking statements even if experience or future changes show that indicated results or events will not be realized.
INVESTOR HIGHLIGHTS STRONG, FOCUSED BUSINESS MODEL Highly differentiated brands in prime locations within historically strong markets Proven track record of outperforming competitive set Creator and continued leader of the boutique hotel segment DEMONSTRATED FINANCIAL STABILITY Significant liquidity available and strong balance sheet Significant recent operating expense reductions Solid year-to-date operating results through Q3 2008 GROWTH STRATEGY Built-in growth from completed renovation repositionings Compelling long-term expansion strategy Scalable infrastructure and experienced management team 1
STRONG, FOCUSED BUSINESS MODEL
OPERATING MODEL Operates and owns or has ownership interests in 12 hotels comprising approximately 3,700 hotel rooms Portfolio of world renowned boutique hotel, restaurant and bar brands Valuable real estate assets in prime locations in New York, Miami, Los Angeles and London Well positioned in the luxury boutique hotel segment Focus on management and branding opportunities 2
WORLD-RENOWNED HOTEL BRANDS Morgans Hotel Group and its distinctive hotel brands offer guests a hip, cutting-edge experience in the world of hotels as theatre DELANO MONDRIAN Our goal is to create an engaging, oneof-a-kind customized experience Energetic, upbeat atmosphere Distinctive restaurants Dynamic bars SANDERSON HARD ROCK THE ORIGINALS Morgans Royalton Hudson Clift St. Martins Lane Ground breaking, modern design Luxury amenities such as spas and pools Special events and celebrity guests 3
DYNAMIC ENVIRONMENTS Marquee Restaurants and Bars Attract both local clientele and hotel guests Significant profit centers Well recognized brands that drive hotel night stays and rate Celebrity Events High profile events, public relations blitzes, and celebrity sightings Recent high-profile events: The Academy Awards Private After Party Art Basel The Shore Club, Delano, Mondrian Grammys various record label parties London Fashion Week After Party Asia de Cuba Skybar Blue Door Hudson Bar 4
MAJOR MARKET FOCUS Historically strong markets with diverse demand and limited supply San Francisco Boston New York The Ames 2 London Clift 1 Los Las Vegas Angeles Palm Springs Scottsdale Morgans 1 St Martins Lane 1 Mondrian 1 Royalton 1 Hard Rock Hotel & Casino 1 Miami Sanderson 1 Mondrian 1 Dubai Mondrian3 Delano 1 Shore Club 1 Hudson 1 1 Existing Hotels 2 Hotels under Development 3 Signed Deals Awaiting Financing Delano/Mondrian Development 3 The Gale 3 Mondrian 1 Mondrian 2 Delano 3 5
OUR CUSTOMERS Based on our market research, we believe our customers generally have the following characteristics: Well-educated (over 80% with at least a college degree) Typically between 25 and 49 years old Adventuresome and seek unique, new experiences On average, 55% are business travelers and 45% are leisure travelers Approximately 30% of room revenues are from corporate negotiated accounts Main industries: technology, financial services, entertainment, advertising, fashion and consumer goods Approximately 36% of guests at our comparable U.S. hotels in 2008 were international travelers Approximately 30% of total revenues within the U.S. and 50% of total revenues within the U.K. are generated by brand loyal repeat guests 6
STRONG PERFORMANCE VERSUS OTHER BRANDS (1) Brand Boutique Luxury Upper Upscale 2007 2006 YTD Q3 2008 Occupancy RevPar RevPAR RevPar RevPAR ADR RevPAR $ (%) Growth % ($) $ Growth % ($) Morgans Hotel Group 266 14.2% 266 (2) 1.8% (2) W 240 8.5% 217 0.9% Ritz Carlton 240 7.5% 247 0.9% Starwood Luxury Collection 212 4.7% 243 1.4% Marriott 127 6.9% 115 1.1% Sheraton 104 6.0% 105 1.6% Westin 134 6.1% 139 1.8% Notes 1. Results are for North American system-wide comparable hotels, as reported by the respective companies 2. Results include comparable hotels and exclude hotels under renovation and hotels acquired during period 7
COST REDUCTON/STRONG EXECUTION Multi-phase plan initiated in early 2008 Estimated Q3 2008 savings was approximately $3 million under this plan Highly targeted approach designed not to affect guest experience The October 2008 reduction is estimated to result in additional savings of approximately $10 million annually including approximately $6 million from the corporate office Additional reductions possible depending on the economic environment 8
DEMONSTRATED FINANCIAL STABILITY
LIQUIDITY SUMMARY Our cash position is in excess of our current estimated uses We generated significant positive cash flow over the 12 month period ended September 30, 2008 (approximately $1 per share) With a proactive approach to cost reductions and rooms back in service, we believe we have built-in cushions against declines in cash flow We have completed our renovation program at our owned hotels and have no deferred maintenance issues Our near term consolidated debt maturities are not significant We have three unencumbered hotels with $32 million of trailing annual EBITDA through September 30, 2008 We are well within our covenant ratios and believe we have significant downside cushion 9
CASH POSITION AS OF SEPTEMBER 30, 2008 Our cash position is in excess of our current estimated uses As of Sept. 30, 2008 Cash Balance at September 30, 2008 ($ in millions) Cash and Cash Equivalents - Consolidated $59.7 Share of Excess Cash at London Joint Venture 12.0 Total Cash $71.7 Estimated Uses Stock Repurchases - Completed in October 2008 $15.5 Creation of 30 New Hotel Rooms at Hudson 5.0 (2) New Joint Venture Projects Under Construction 25.0 (2)(3) Total Estimated Uses $45.5 Notes 1. Received in December 2008 2. Anticipated spend in Q4 2008 & 2009 3. Includes an estimated $10 million to fund the completion of Mondrian South Beach, $11 million to fund the letter of credit posted for the Hard Rock expansion and miscellaneous other capital calls, as necessary 10
CASH FLOW We have generated significant positive cash flow over the twelve month period ended September 30, 2008 Twelve Months Ended September 2008 Amounts in Millions (except per share amount) Adjusted EBITDA - Consolidated Operations $77.8 Adjusted Interest Expense - Consolidated Operations ($31.9) Estimated Maintenance Capital ($12.4) (1) Estimated Cash Flow $33.5 Weighted Average Share Outstanding 31.0 Estimated Cash Flow Per Share $1.08 Notes 1. Assumes a 4% reserve on total revenues 11
DEBT SUMMARY - No corporate debt maturities for six years - No significant near-term maturities September 2008 Instrument ($ in millions) Security Maturity with extensions Convertible Notes $172.5 October 2014 Trust Preferred 50.1 August 2036 Revolving Credit 0.0 Delano, Royalton, Morgans October 2011 Total Corporate 222.6 Non-recourse Mortgage Note 250.0 Hudson October 2011 (1) Non-recourse Mortgage Note 120.0 Mondrian LA October 2011 (1) Non-recourse Mortgage Note 40.0 Mondrian Scottsdale May 2009 Non-recourse Mortgage Note 10.0 The Gale January 2010 Other 6.3 Various Adjusted Debt (2) $648.9 Notes 1. Debt may be extended to October 2011 if the hotel achieves a 1.55 interest coverage ratio for the first and second quarters of 2010 2. Consolidated debt of $730.1 million as of September 30, 2008 less Clift lease obligation of $81.2 million as of September 30, 2008 12
UNENCUMBERED ASSETS We have three unencumbered assets that generated approximately $32 million in EBITDA over the twelve months ended September 30, 2008 Twelve Months Outstanding Debt Ended September 2008 At September 2008 ($ in millions) ($ in millions) Delano $22.3 $0.0 Royalton (1) $5.7 $0.0 Morgans (1) $4.3 $0.0 Total $32.3 $0.0 Notes 1. Prior twelve month cash flows include rooms out of service and pre-opening expenses 13
COVENANT CALCULATIONS We are in compliance with our debt covenants and have significant downside cushion Actual Ratio Permitted Ratios Revolving Credit Facility Interest Expense Coverage Ratio (1) 2.4x 1.75x Leverage Ratio (1) 4.6x 7.0x - 2008 6.0x - 2009 Amount Outstanding Maximum Availability based on 2008 Covenants $0 million $225 million $189 million Trust Preferred Minimum Fixed Coverage Ratio 2.4x 1.4x Notes 1. Covenants are calculated based on consolidated hotels and exclude EBITDA and debt related to unconsolidated joint ventures. The convertible bond and trust preferred notes are excluded from the leverage ratio but included in the interest coverage ratio 14
REVENUE GROWTH (1) Occupancy ADR (%) 100.0 75.0 50.0 3.4% 1.2% 78.0 80.6 78.3 79.2 ($) 375.0 350.0 325.0 300.0 323 10.7% 358 334 0.7% 336 25.0 275.0 0.0 Y-O-Y ('06- '07) YTD (Q3'07 - Q3'08) 250.0 Y-O-Y ('06- '07) YTD (Q3'07 - Q3'08) RevPAR ($) 300 275 250 252 14.5% 288 262 1.8% 266 225 200 175 150 Y-O-Y ('06- '07) YTD (Q3'07 - Q3'08) Note 1. Statistics include comparable hotels operated by the Company, excluding hotels under renovation/expansion and hotels acquired during period 15
FINANCIAL PERFORMANCE Adjusted EBITDA (1) ($MM) 125.0 100.0 75.0 50.0 85.1 29.5% 110.1 76.0-7.1% 70.6 44.9 9.5% 49.2 25.0 0.0 Y-O-Y ('06- '07) YTD Q3 ('07 - '08) YTD Q3 ('07 - '08) excl. renovations (2) Notes 33.1% 35.3% 34.9% 35.8% 1. EBITDA adjusted for non-operating income/expense, Clift EBITDA and stock compensation expense. For a reconciliation of Adjusted EBITDA to GAAP financial measures, refer to the Company s earning releases dated March 12, 2008 and November 5, 2008 2. Excludes hotels under renovation during the comparable period (i.e. Mondrian Los Angeles, Morgans, Royalton and Hard Rock) 16
ADJUSTED EBITDA - 2008 We believe Adjusted EBITDA in 2008 is not indicative of a run-rate due to renovation displacement Adjusted EBITDA guidance for 2008 is $97 million to $100 million Guidance reflects an estimated $12 million to $15 million of renovation displacement (Mondrian LA, Morgans, Hard Rock) No significant impact from Mondrian South Beach assumed in 2008 Management estimates that each point of RevPAR change impacts EBITDA by approximately $2 million 17
EBITDA AND DEBT ANALYSIS ($ in thousands) 12 Months Ended As of Sept. 30, 2008 Sept. 30, 2008 Adjusted EBITDA Net Debt EBITDA from Operating Hotels: Morgans / Royalton / Delano $ 32,275 Hudson 44,108 $250,000 Mondrian LA 8,670 120,000 London - 50% Interest 15,092 93,887 Estimated EBITDA Displacement for Rooms out of Service 10,000 Total Estimated EBITDA from Operating Hotels ex. Scottsdale (1) 110,145 463,887 Mondrian Scottsdale 845 40,000 Management Fee Income 19,377 Corporate Overhead (27,426) 222,500 Projected Savings from Restructuring 10,000 Other 16,363 Total Estimated EBITDA from Hotel Operations (1) 112,941 742,750 Cash (incl. London JV) (71,683) Total Net Debt $112,941 $671,067 Cash Invested in Assets Under Development (2) : Hard Rock $61,668 Mondrian South Beach 24,210 Mondrian Soho 6,298 Ames Boston 6,837 Gale 19,873 Total $118,886 Notes 1. As adjusted for displacements 2. Represents cash invested and does not include equity in income or losses of unconsolidated joint ventures 18
GROWTH STRATEGY
REPOSITIONING Major renovations now completed with four owned hotels now fully renovated and reimagined Estimated EBITDA impact from owned rooms out of service in 2008 was $10 million Completed: Morgans Fully renovated rooms and lobby, completed September 2008 Mondrian LA Royalton Delano Fully renovated and reconfigured rooms and upgrades to lobby, completed September 2008 Fully renovated rooms, lobby and a new restaurant, Brasserie 44, completed in October 2007 Completed room renovations, expanded Agua spa and opened the Florida Room lounge designed by Lenny Kravitz and Kravitz Design in December 2007 In Progress: Hudson Opportunity to convert 115 rental rooms into guestrooms; Expected conversion of 30 rooms to be completed in 2009 Completion of Mondrian South Beach in December 2008 19
BUILT-IN GROWTH Two hotels and two hotel additions under development, with financing in place, comprising approximately 1,300 rooms Five future hotels, all pending financing, comprising approximately 1,900 rooms, and one expansion opportunity New Projects and Expansion Hard Rock Expansion Mondrian SoHo The Ames, Boston Hudson Expansion Future Projects Subject to Financing The Gale, Miami Delano Dubai Mondrian Palm Springs Mondrian Las Vegas Delano Las Vegas Hudson Lower Level Expansion 2009 20
BRAND EXPANSION STRATEGY We believe there is a significant opportunity to expand our portfolio of brands in attractive new markets, including international locations We believe our infrastructure, scalable operations and flexible business model provide us with a significant competitive advantage Markets at IPO Additions Target Markets New York Los Angeles Miami San Francisco London New York Las Vegas Scottsdale Miami Boston Palm Springs (1) Dubai (1) Select major international markets currently under consideration in: United States Europe Middle East Note 1. Assuming financing is obtained 21
GROWING JV AND MANAGEMENT PLATFORM Focus on management and branding contracts with limited real estate investments Operating At IPO Sanderson St Martins Lane Shore Club Opened / Acquired Since IPO Occupancy (%) + Hard Rock (1) + Mondrian South Beach 2006 ADR ($) Under Development (2) RevPAR ($) Hard Rock Expansion Mondrian SoHo The Ames, Boston Note 1. Approximately $8 million management fee earned in 2007 2. Does not include projects which have not yet been fully financed (i.e. Mondrian Palm Springs and Delano Dubai) 22
SCALABLE INFRASTRUCTURE SALES Sales force segmented by industry and booking source Over 100-person team across our hotels 10-person global sales team focused by geography SERVICE Customer satisfaction routinely evaluated with favorable results using thirdparty consumer research STATE OF THE ART TECHNOLOGY MHG employs what it believes are among the best systems available to the hospitality industry 23
CONCLUSION
SUMMARY STRONG, FOCUSED BUSINESS MODEL Highly differentiated brands in prime locations within historically strong markets Proven track record of outperforming competitive set Creator and continued leader of the boutique hotel segment DEMONSTRATED FINANCIAL STABILITY Significant liquidity available and strong balance sheet Significant recent operating expense reductions Solid year-to-date operating results through Q3 2008 GROWTH STRATEGY Built-in growth from completed renovation repositionings Compelling long-term expansion strategy Scalable infrastructure and experienced management team 24