Contacts:
Richard Szymanski
Morgans Hotel Group Co.
212.277.4188

Neil Maitland
The Abernathy MacGregor Group
212.371.5999

MORGANS HOTEL GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2010 RESULTS

NEW YORK, NY — March 1, 2011 — Morgans Hotel Group Co. (NASDAQ: MHGC) (“MHG” or the “Company”) today reported financial results for the quarter and year ended December 31, 2010.

•

Adjusted EBITDA, was $18.4 million in the fourth quarter of 2010, an increase of 40.0% from the fourth quarter of 2009. For the full year 2010, Adjusted EBITDA was $53.0 million, an increase of 30.8% from 2009.

•

Operating margins for Owned Comparable Hotels increased by 440 basis points compared to the fourth quarter of 2009. Excluding unusual items in 2009, operating margins for Owned Comparable Hotels increased by 280 basis points. Operating margins for Owned Comparable Hotels increased by 250 basis points in 2010 compared to 2009.

•

The percentage increase in Adjusted EBITDA was 4.3x the percentage increase in revenue per available room (“RevPAR”) for System-Wide Comparable Hotels for the fourth quarter of 2010. Excluding unusual items in 2009, the ratio was 3.0x. For the full year 2010, the ratio was 2.2x.

•

RevPAR for System-Wide Comparable Hotels increased by 5.2%, or 5.7% in constant dollars, in the fourth quarter of 2010 from the comparable period in 2009. The severe winter weather in December had a significant adverse impact on the New York, London and Miami markets resulting in a 10.2% RevPAR decline over the last two weeks of December. Prior to that, RevPAR was up 8.0%. For the full year, RevPAR for System-Wide Comparable Hotels increased by 9.7%, or 10.0% in constant dollars.

•

In February 2011, the Company opened the Mondrian in New York’s SoHo neighborhood. The hotel consists of 270 rooms, two bars, an innovative sustainable seafood restaurant and spectacular views of the New York skyline.

•

MHG recently announced four new management agreements which include a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG’s existing brands.

Fred Kleisner, CEO of Morgans Hotel Group, said: “2010 was a very good year and we were pleased to deliver increases in both RevPAR and EBITDA. We posted continued growth in the fourth quarter, including exceptional growth in EBITDA. With the improving hotel market, we expect favorable operating leverage and continued cost vigilance to allow us to deliver strong flow through from RevPAR to EBITDA in 2011. We remain excited about the prospects for the business; the new Mondrian SoHo becomes fully operational today and we recently announced four new management contracts for Morgans branded hotels in various markets around the world, underscoring the untapped potential of our brands. We remain focused on executing our asset-light strategy and driving increased long-term value for shareholders.”

Fourth Quarter 2010 Operating Results

Adjusted EBITDA for the fourth quarter of 2010 was $18.4 million, a $5.3 million or 40.0% increase from the fourth quarter of 2009 driven by improved operating margins due to RevPAR growth and a reduction in hotel operating expenses.

Operating margins for Owned Comparable Hotels increased by 440 basis points primarily due to lower selling, general and administrative expenses and reductions in real estate taxes due to successful appeals. Excluding unusual items in 2009, which consisted of higher operating supply purchases to take advantage of extraordinary discounts, Owned Comparable Hotel operating margins increased by 280 basis points.

RevPAR at System-Wide Comparable Hotels increased by 5.2% (5.7% in constant dollars) in the fourth quarter of 2010 compared to the fourth quarter of 2009 driven by occupancy gains. The severe winter weather in December had a significant adverse impact on the New York, London and Miami markets during a popular vacation period resulting in a 10.2% RevPAR decline over the last two weeks of December. Prior to that, RevPAR for System-Wide Comparable Hotels was up 8.0%.

In New York, RevPAR increased by 5.9% with the majority of the increase driven by ADR. The adverse weather conditions affected results as RevPAR had increased by 8.0% prior to the storms.

RevPAR increased by 11.4% in constant dollars at MHG’s London hotels, despite the severe winter weather. All of the RevPAR increases were driven by ADR. Prior to the storms, RevPAR increased by 14.5% in constant dollars.

RevPAR increased by 1.6% at MHG’s South Beach hotels. New York and Europe are the two primary feeder markets for our South Beach hotels and the difficult travel conditions resulted in a 13.2% RevPAR decline over the last two weeks of December. Prior to the storms, RevPAR increased by 5.1%.

RevPAR increased by approximately 5% in both Los Angeles and San Francisco, driven primarily by increases in occupancy,

MHG recorded a net loss of $6.7 million in the fourth quarter of 2010 compared to a loss of $51.3 million in the fourth quarter of 2009 as MHG reported higher operating income and lower interest expense in 2010. The net loss in the fourth quarter of 2009 included higher impairment losses and a loss from discontinued operations.

Balance Sheet and Liquidity

MHG’s total consolidated debt at December 31, 2010, excluding the Clift lease and including the convertible notes at face value, is $586.0 million with a weighted average interest rate of 2.68%. As of December 31, 2010, MHG had $94 million of liquidity, which includes $89.0 million available under the line of credit. In addition, MHG has restricted cash of $28.8 million, primarily consisting of escrows for debt service, taxes, insurance and capital expenditures.

Debt maturities in 2011 consist of $227.7 million secured by the Hudson hotel, $103.5 million secured by the Mondrian in LA hotel and $26.0 million under the line of credit secured by Delano, Royalton and Morgans. The Company is pursuing a number of options to finance the maturities including debt financing, asset sales and other sources. MHG believes that the combination of rising hotel cash flows and improving capital markets should provide sufficient capital to retire or refinance the debt and provide funds for growth.

MHG has net operating losses of approximately $220 million at December 31, 2010, which may be used to offset future income, including potential gains on the sale of assets or interests therein.

As of December 31, 2010, MHG’s total future capital commitments for development projects and joint ventures for the next 12 months are approximately $1.0 million, all of which relates to the Mondrian in SoHo.

In December 2010, the court granted MHG’s motion for summary judgment and dismissed a complaint by the mezzanine lender on its former Scottsdale property seeking $15.9 million in damages. The lender appealed and the Company will continue to defend this lawsuit vigorously.

In January 2011, MHG transferred its interests in the property across the street from the Delano to an affiliate of the lender. As a result of the transaction, MHG was relieved of $10.5 million of non-recourse mortgage and mezzanine indebtedness that was previously consolidated on its balance sheet. The property across from Delano was a development property with no operations and generated no EBITDA.

Due to the continued difficulties in the Las Vegas marker, the Hard Rock joint venture’s operating cash flows have not been sufficient to cover the aggregate debt service. There is a risk to MHG’s equity position and management agreement, which may be terminated by the lenders in the event of foreclosure or under certain other circumstances. The joint venture continues to be in discussions with the lenders to resolve the matter. MHG has consistently reduced its equity percentage in the Hard Rock joint venture over time, eventually writing off the entire investment in 2009. While the potential conclusion of the Hard Rock relationship would reduce MHG’s management fees in the short term, MHG has been focused on its existing brands such as Delano and Mondrian and has been successful in signing new and more secure contracts. MHG recently announced the opening of the Mondrian in SoHo and the signing of four new Morgans branded hotel management agreements including two for new Delano hotels.

Development Activity

In February 2011, MHG opened a new Mondrian hotel in the SoHo neighborhood in New York. This is MHG’s third Mondrian hotel and it features 270 rooms, two exciting bars, an innovative seafood restaurant and spectacular views. The hotel is owned through a joint venture in which MHG has a 20% interest. MHG is managing the hotel under a 10 year contract with two 10 year extension options.

In February 2011, MHG announced a new management agreement for a 265 room Mondrian hotel in Doha, Qatar. The hotel is located in the prestigious neighborhood of West Bay Lagoon and is currently under construction and due to open in 2013.

In February 2011, MHG announced a new management agreement for a 200 room Delano hotel at an exclusive resort on the Aegean Sea in Turkey. This will be Morgans’ first hotel in the region and it is expected to open in 2013.

In February 2011, MHG announced a new management agreement for a 114 room Delano hotel in Mexico, on the beach at the tip of the Baja Peninsula in Cabo San Lucas. The hotel is currently under construction and is expected to open in 2013.

In February 2011, MHG announced a new management agreement for a 175 room hotel in New York in the Highline area. The hotel will be branded with one of Morgans’ brands and is expected to open in 2014.

MHG continues to focus on enhancing its existing assets and has been re-concepting several food and beverage venues to improve profitability. In October 2010, MHG opened a new restaurant at Royalton, Forty Four, which features “The Cocktail Collective”, a group of all-star bartenders from across the United States creating a unique cocktail menu. Additionally, in May 2010, MHG opened a new restaurant at Hudson, Hudson Hall, reminiscent of an Ivy League mess hall. MHG’s event venue at Hudson, Good Units, which opened in early 2010, received all necessary licenses to hold additional events during the third quarter of 2010, and is continuing to host successful events.

2011 Outlook

It continues to be difficult to predict results given the short term booking patterns and transient nature of the hotel business. As we have seen in recent months, travel patterns can be volatile making prior year comparisons challenging. In the first quarter of 2011 in particular, it’s important to note that our results may be less than the first quarter of 2010, primarily due to last year’s exceptional results in Miami which hosted the Super Bowl.

MHG believes that if the RevPAR increase at System-Wide Comparable Hotels for 2011 compared to 2010 is between 7% to 9% it should result in Adjusted EBITDA in the $52 million to $54 million range assuming our ownership levels remain the same. This reflects the addition of Mondrian in SoHo and assumes the termination of the Hard Rock management agreement.

Conference Call

MHG will host a conference call to discuss the fourth quarter financial results today at 5:00 PM Eastern time.

The call will be webcast live over the Internet at www.morganshotelgroup.com under the About Us, Investor Overview section. Participants should follow the instructions provided on the website for the download and installation of audio applications necessary to join the webcast. The call can also be accessed live over the phone by dialing (888) 802-8577 or (973) 935-8754 for international callers; the conference ID is 36254628. A replay of the call will be available two hours after the call and can be accessed by dialing (800) 642-1687 or (706) 645-9291 for international callers; the conference ID is 36254628. The replay will be available from March 1, 2011 through March 8, 2011.

Definitions

“Owned Comparable Hotels” includes all wholly-owned hotels operated by MHG except for hotels under renovation during the current or the prior year, development projects and discontinued operations. Owned Comparable Hotels for the three and twelve months ended December 31, 2010 and 2009 excludes Mondrian Scottsdale, which was classified as a discontinued operation in 2010 and effective March 16, 2010 was no longer owned or managed by MHG.

“System-Wide Comparable Hotels” includes all hotels operated by MHG except for hotels added or under renovation during the current or the prior year, development projects and discontinued operations. System-Wide Comparable Hotels for the three and twelve months ended December 31, 2010 and 2009 excludes the Hard Rock Hotel & Casino in Las Vegas (“Hard Rock”), which was under renovation and expansion in 2009, Mondrian Scottsdale, which was classified as a discontinued operation in 2010 and effective March 16, 2010 was no longer owned or managed by MHG, and Ames in Boston, the San Juan Water and Beach Club, and Hotel Las Palapas, which MHG began managing in the fourth quarter of 2009.

“Adjusted EBITDA” is adjusted earnings before interest, taxes, depreciation and amortization as further defined below.

About Morgans Hotel Group

Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first “boutique” hotel and a continuing leader of the hotel industry’s boutique sector. Morgans Hotel Group operates and owns, or has an ownership interest in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in South Beach, Mondrian in Los Angeles, South Beach and New York, Clift in San Francisco, Ames in Boston, and Sanderson and St Martins Lane in London. Morgans Hotel Group also manages hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico. Morgans Hotel Group has other property transactions in various stages of completion including a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG’s existing brands. For more information please visit www.morganshotelgroup.com.

Forward-Looking and Cautionary Statements

This press release may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs and prediction of certain future events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate” “believe,” “project,” or other similar words or expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results or other future events to differ materially from those expressed in any forward-looking statement. Important risks and factors that could cause our actual results to differ materially from those expressed in any forward-looking statements include, but are not limited to, the need for lender approval of any amendments to our loan agreements, economic, business, competitive market and regulatory conditions such as: a sustained downturn in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; continued tightness in the global credit markets; general volatility of the capital markets and our ability to access the capital markets; our ability to refinance our current outstanding debt and to repay outstanding debt as such debt matures; our ability to protect the value of our name, image and brands and our intellectual property; risks related to natural disasters, such as earthquakes, volcanoes and hurricanes; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; and other risk factors discussed in MHG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, Quarterly Reports on form 10-Q for the quarters ended June 30, 2010 and September 30, 2010 and other documents filed by MHG with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and MHG assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.

Income Statement
(In thousands, except per share amounts)

		Three Months								Year Ended
		Ended December 31,								Ended December 31,
		2010				2009				2010				2009
Revenues :
Rooms		$	39,825			$	38,155			$	139,268			$	127,188
Food & beverage			18,389				18,203				69,451				73,278
Other hotel			2,583				2,724				9,313				9,512
Total hotel revenues			60,797				59,082				218,032				209,978
Management and other fees			4,259				3,763				18,338				15,073
Total revenues			65,056				62,845				236,370				225,051
Operating Costs and Expenses :
Rooms			11,243				11,551				42,620				41,602
Food & beverage			15,701				14,636				58,227				56,492
Other departmental			1,470				1,711				5,304				6,159
Hotel selling, general and administrative			12,693				13,551				48,216				47,705
Property taxes, insurance and other			3,772				4,737				16,233				17,599
Total hotel operating expenses			44,879				46,186				170,600				169,557
Corporate expenses :
Stock based compensation			1,995				2,959				10,887				11,763
Other			5,273				5,261				23,651				21,751
Depreciation and amortization			8,629				7,344				32,158				29,623
Restructuring, development and disposal costs			986				4,063				3,916				6,083
Impairment loss on receivables from unconsolidated joint ventures			50				—				5,549				—
Total operating costs and expenses			61,812				65,813				246,761				238,777
Operating loss			3,244				(2,968	)			(10,391	)			(13,726	)
Interest expense, net			8,288				13,292				41,346				48,557
Interest expense on hotel held for non sale disposition			288				318				1,137				844
Equity in loss of unconsolidated joint ventures			6,766				11,155				16,203				33,075
Impairment loss on property held for non sale disposition			—				—				—				11,913
Other non-operating (income) expense			(2,713	)			(4,015	)			33,076				(2,081	)
Pre tax loss			(9,385	)			(23,718	)			(102,153	)			(106,034	)
Income tax expense (benefit)			(2,448	)			17,820				(1,913	)			(16,799	)
Net loss from continuing operations			(6,937	)			(41,538	)			(100,240	)			(89,235	)
Income (loss) from discontinued operations, net of tax		$	8			$	(11,212	)		$	17,170			$	(12,370	)
Net loss			(6,929	)			(52,750	)			(83,070	)			(101,605	)
Net loss attributable to noncontrolling interest		$	188			$	1,482			$	2,221			$	1,881
Net loss attributable to Morgans Hotel Group Co.		$	(6,741	)		$	(51,268	)		$	(80,849	)		$	(99,724	)
Preferred stock dividends and accretion		$	(2,197	)		$	(1,746	)		$	(8,554	)		$	(1,746	)
Net loss attributable to common stockholders		$	(8,938	)		$	(53,014	)		$	(89,403	)		$	(101,470	)
(Loss) income per share:
Basic and diluted from continuing operations		$	(0.30	)		$	(1.41	)		$	(3.49	)		$	(2.97	)
Basic and diluted from discontinued operations		$	0.00			$	(0.37	)		$	0.56			$	(0.41	)
Basic and diluted attributable to common stockholders		$	(0.30	)		$	(1.78	)		$	(2.93	)		$	(3.38	)
Weighted average common shares outstanding — basic and diluted			30,284				29,714				30,563				30,017

		(In Actual Dollars)												(In Constant Dollars, if different)												(In Actual Dollars)												(In Constant Dollars, if different)
		Three Months												Three Months												Year												Year
		Ended Dec. 31,								%				Ended Dec. 31,								%				Ended Dec. 31,								%				Ended Dec. 31,								%
Selected Hotel Operating Statistics (1)		2010				2009				Change				2010				2009				Change				2010				2009				Change				2010				2009				Change
Morgans
Occupancy			89.2	%			92.8	%			-3.9	%															89.8	%			87.0	%			3.2	%
ADR		$	318.33			$	301.92				5.4	%														$	261.33			$	244.93				6.7	%
RevPAR		$	283.95			$	280.18				1.3	%														$	234.67			$	213.09				10.1	%
Royalton
Occupancy			88.3	%			91.9	%			-3.9	%															88.5	%			87.1	%			1.6	%
ADR		$	367.29			$	335.61				9.4	%														$	293.89			$	276.02				6.5	%
RevPAR		$	324.32			$	308.43				5.2	%														$	260.09			$	240.41				8.2	%
Hudson
Occupancy			91.2	%			87.4	%			4.3	%															88.6	%			83.8	%			5.7	%
ADR		$	253.47			$	247.47				2.4	%														$	213.33			$	199.96				6.7	%
RevPAR		$	231.16			$	216.29				6.9	%														$	189.01			$	167.57				12.8	%
Delano
Occupancy			64.2	%			62.3	%			3.0	%															61.1	%			62.3	%			-1.9	%
ADR		$	470.67			$	504.26				-6.7	%														$	479.93			$	488.30				-1.7	%
RevPAR		$	302.17			$	314.15				-3.8	%														$	293.24			$	304.21				-3.6	%
Mondrian LA
Occupancy			69.2	%			64.2	%			7.8	%															71.2	%			63.4	%			12.3	%
ADR		$	247.25			$	253.31				-2.4	%														$	257.38			$	264.22				-2.6	%
RevPAR		$	171.10			$	162.63				5.2	%														$	183.25			$	167.52				9.4	%
Clift
Occupancy			81.1	%			65.7	%			23.4	%															76.9	%			65.5	%			17.4	%
ADR		$	179.52			$	212.15				-15.4	%														$	187.22			$	200.70				-6.7	%
RevPAR		$	145.59			$	139.38				4.5	%														$	143.97			$	131.46				9.5	%
Total Owned Comparable Hotels
Occupancy			83.4	%			78.5	%			6.2	%															81.5	%			76.0	%			7.2	%
ADR		$	270.46			$	275.84				-2.0	%														$	244.39			$	241.78				1.1	%
RevPAR		$	225.56			$	216.46				4.2	%														$	199.18			$	183.75				8.4	%
St. Martins Lane
Occupancy			77.6	%			79.4	%			-2.3	%			77.6	%			79.4	%			-2.3	%			76.1	%			74.4	%			2.3	%			76.1	%			74.4	%			2.3	%
ADR		$	394.37			$	364.87				8.1	%		$	385.50			$	345.54				11.6	%		$	359.88			$	322.57				11.6	%		$	359.88			$	318.53				13.0	%
RevPAR		$	306.03			$	289.71				5.6	%		$	299.15			$	274.36				9.0	%		$	273.87			$	239.99				14.1	%		$	273.87			$	236.99				15.6	%
Sanderson
Occupancy			79.3	%			80.0	%			-0.9	%			79.3	%			80.0	%			-0.9	%			76.8	%			71.8	%			7.0	%			76.8	%			71.8	%			7.0	%
ADR		$	467.31			$	419.35				11.4	%		$	456.80			$	397.14				15.0	%		$	419.50			$	386.29				8.6	%		$	419.50			$	381.45				10.0	%
RevPAR		$	370.58			$	335.48				10.5	%		$	362.24			$	317.71				14.0	%		$	322.18			$	277.36				16.2	%		$	322.18			$	273.88				17.6	%
Shore Club
Occupancy			54.5	%			52.0	%			4.8	%															55.0	%			50.8	%			8.3	%
ADR		$	278.66			$	302.18				-7.8	%														$	284.65			$	307.09				-7.3	%
RevPAR		$	151.87			$	157.13				-3.3	%														$	156.56			$	156.00				0.4	%
Mondrian South Beach
Occupancy			66.8	%			62.2	%			7.4	%															59.4	%			51.2	%			16.0	%
ADR		$	234.69			$	220.87				6.3	%														$	232.19			$	221.11				5.0	%
RevPAR		$	156.77			$	137.38				14.1	%														$	137.92			$	113.21				21.8	%
System-wide Comparable Hotels
Occupancy			78.1	%			74.1	%			5.4	%			78.1	%			74.1	%			5.4	%			75.8	%			70.4	%			7.7	%			75.8	%			70.4	%			7.7	%
ADR		$	287.48			$	288.01				-0.2	%		$	286.29			$	285.28				0.4	%		$	264.17			$	259.26				1.9	%		$	264.17			$	258.69				2.1	%
RevPAR		$	224.52			$	213.42				5.2	%		$	223.59			$	211.44				5.7	%		$	200.24			$	182.52				9.7	%		$	200.24			$	182.12				10.0	%
Hard Rock (2)
Occupancy			72.5	%			84.2	%			-13.9	%															78.3	%			88.2	%			-11.2	%
ADR		$	118.66			$	113.09				4.9	%														$	128.09			$	133.98				-4.4	%
RevPAR		$	86.03			$	95.22				-9.7	%														$	100.29			$	118.17				-15.1	%
Ames (3)
Occupancy			70.4	%			33.4	%			n/m																67.8	%			33.4	%			n/m
ADR		$	229.00			$	174.96				n/m															$	217.14			$	174.96				n/m
RevPAR		$	161.22			$	58.44				n/m															$	147.22			$	58.44				n/m
San Juan Water and Beach Club (4)
Occupancy			44.0	%			0.0	%			n/m																59.1	%			0.0	%			n/m
ADR		$	115.52			$	—				n/m															$	129.80			$	—				n/m
RevPAR		$	50.83			$	—				n/m															$	76.71			$	—				n/m
Hotel Las Palapas (4)
Occupancy			51.1	%			74.7	%			n/m				51.1	%			74.7	%			n/m				56.0	%			74.7	%			n/m				56.0	%			74.7	%			n/m
ADR		$	143.88			$	175.40				n/m			$	140.12			$	180.23				n/m			$	140.25			$	175.40				n/m			$	139.31			$	180.23				n/m
RevPAR		$	73.52			$	130.95				n/m			$	71.60			$	134.63				n/m			$	78.54			$	130.95				n/m			$	78.01			$	134.63				n/m

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We believe that earnings before interest, income taxes, depreciation and amortization (EBITDA) is a useful financial metric to assess our operating performance before the impact of investing and financing transactions and income taxes. It also facilitates comparison between us and our competitors. Given the significant investments that we have made in the past in property and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. We believe that EBITDA will provide investors with a useful tool for assessing the comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures.

The Company’s management has historically used adjusted EBITDA (Adjusted EBITDA) when evaluating the operating performance for the entire Company as well as for individual properties or groups of properties because we believe the Company’s core business model is that of an owner and operator of hotels, and the inclusion or exclusion of certain items is necessary to provide the most accurate measure of on-going core operating results and to evaluate comparative results period over period. As such, Adjusted EBITDA excludes other non-operating expenses (income) that do not relate to the on-going performance of our assets and excludes the operating performance of assets in which we do not have a direct or indirect fee simple ownership interest. We exclude the following items from EBITDA to arrive at Adjusted EBITDA:

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Other non-operating expenses (income), such as executive terminations not related to restructuring initiatives discussed below, costs of financings, litigation and settlement costs and other items such as proceeds from the sale of condominium units and related costs that relate to the financing and investing activities of our assets and not to the on-going operating performance of our assets, both consolidated and unconsolidated, and changes in fair market value of the warrants issued to investors in the Company;

•

Restructuring, development and disposal costs: these charges primarily relate to losses on asset disposals as part of major renovation projects and the write-off of abandoned development projects resulting primarily from events generally outside management’s control such as the tightening of credit markets. We believe that these charges do not relate to the ongoing operating performance of our assets as measured by Adjusted EBITDA.

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Impairment loss on development projects, hotels, investments in joint ventures and receivables from joint ventures: these charges do not relate to the ongoing operating performance of our assets as measured by Adjusted EBITDA. To the extent that economic conditions do not continue to improve, we may incur additional non-cash impairment charges related to assets under development, wholly-owned assets, or investments in joint ventures. We believe these adjustments are necessary to provide the most accurate measure of core operating results as a means to evaluate comparative results.

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The EBITDA related to leased hotels to more accurately reflect the operating performance of assets in which we have a direct or indirect fee simple ownership interest;

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The EBITDA related to hotels reported as discontinued operations to more accurately reflect the operating performance of assets in which we expect to have an ongoing direct or indirect ownership interest; and

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Stock-based compensation expense, as this is not necessarily an indication of the operating performance of our assets.

We also make an adjustment to EBITDA for hotels in which our percentage ownership interest has changed to facilitate period-over-period comparisons and to more accurately reflect the operating performance of assets based on our actual ownership. In this respect, our method of calculating Adjusted EBITDA has changed from prior quarters, and calculations of Adjusted EBITDA will continue to vary from quarter to quarter to reflect changing ownership interests.

We believe Adjusted EBITDA provides management and our investors with a more accurate financial metric by which to evaluate our performance as it eliminates the impact of costs incurred related to investing and financing transactions. Internally, the Company’s management utilizes Adjusted EBITDA to measure the performance of our core on-going hotel operations and is used extensively during our annual budgeting process. Management also uses Adjusted EBITDA as a measure in determining the value of acquisitions, expansion opportunities, and dispositions and borrowing capacity. Adjusted EBITDA is a key metric which management evaluates prior to execution of any strategic investing or financing opportunity.

The Company has historically reported Adjusted EBITDA to its investors and believes that this continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and to evaluate the results of its core on-going operations.

The use of EBITDA and Adjusted EBITDA has certain limitations. Our presentation of EBITDA and Adjusted EBITDA may be different from the presentation used by other companies and therefore comparability may be limited. Depreciation expense for various long-term assets, interest expense, income taxes and other items have been and will be incurred and are not reflected in the presentation of EBITDA or Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, EBITDA and Adjusted EBITDA do not reflect capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation, interest and income tax expense, capital expenditures and other items both in our reconciliations to our GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA is not defined under accounting principles generally accepted in the United States, or U.S. GAAP, and EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. In addition, EBITDA is impacted by reorganization of businesses and other restructuring-related charges. When assessing our operating performance, you should not consider this data in isolation, or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.

A reconciliation of net income (loss), the most directly comparable U.S. GAAP measures, to EBITDA and Adjusted EBITDA for each of the respective periods indicated is as follows:

EBITDA Reconciliation
(In thousands)

		Three Months								Year
		Ended December 31,								Ended December 31,
		2010				2009				2010				2009
Net loss		$	(6,741	)		$	(51,268	)		$	(80,849	)		$	(99,724	)
Interest expense, net			8,576				13,610				42,483				49,401
Income tax (benefit) expense			(2,448	)			17,820				(1,913	)			(16,799	)
Depreciation and amortization expense			8,629				7,344				32,158				29,623
Proportionate share of interest expense from unconsolidated joint ventures			3,768				5,320				15,392				23,728
Proportionate share of depreciation expense from unconsolidated joint ventures			1,953				2,328				11,884				8,439
Proportionate share of depreciation expense of minority interests in consolidated joint ventures			(95	)			(76	)			(361	)			(325	)
Net income attributable to noncontrolling interest			(216	)			(1,706	)			(2,649	)			(3,321	)
Proportionate share of loss from unconsolidated joint ventures not recorded due to negative investment balances			(3,144	)			(21,508	)			(15,283	)			(35,189	)
EBITDA			10,282				(28,136	)			862				(44,167	)
Add : Other non operating expense			(2,713	)			(4,015	)			33,076				(2,081	)
Add : Other non operating expense from unconsolidated joint ventures			8,432				26,877				17,722				45,486
Add: Restructuring, development and disposal costs			986				4,063				3,916				6,083
Add: Impairment loss			50				—				5,549				11,913
Less : EBITDA from Clift, a leased hotel			(633	)			(234	)			(1,844	)			(316	)
Add : Stock based compensation			1,995				2,959				10,887				11,763
Less: (Loss) Income from hotel ownership changes and discontinued operations			(8	)			11,625				(17,170	)			11,843
Adjusted EBITDA		$	18,391			$	13,139			$	52,998			$	40,524

Owned Comparable Hotel Room Revenue Analysis
(In thousands, except percentages)

		Three Months												Year
		Ended December 31,								%				Ended December 31,								%
		2010				2009				Change				2010				2009				Change
Morgans		$	2,979			$	2,937				1	%		$	9,767			$	8,867				10	%
Royalton			5,013				4,768				5	%			15,952				14,747				8	%
Hudson			17,724				16,530				7	%			57,360				49,853				15	%
Delano			5,392				5,606				-4	%			20,780				21,539				-4	%
Mondrian LA			3,733				3,546				5	%			15,862				14,483				10	%
Clift			4,984				4,768				5	%			19,547				17,700				10	%
Total Owned Comparable Hotels		$	39,825			$	38,155				4	%		$	139,268			$	127,189				9	%

Owned Comparable Hotel Revenue Analysis
(In thousands, except percentages)

		Three Months												Year
		Ended December 31,								%				Ended December 31,								%
		2010				2009				Change				2010				2009				Change
Morgans		$	5,015			$	5,121				-2	%		$	17,543			$	17,159				2	%
Royalton			6,591				6,498				1	%			20,969				20,375				3	%
Hudson			22,304				20,015				11	%			72,804				65,663				11	%
Delano			11,255				11,539				-2	%			43,628				44,814				-3	%
Mondrian LA			7,424				7,324				1	%			31,727				31,266				1	%
Clift			8,208				8,586				-4	%			31,361				30,702				2	%
Total Owned Comparable Hotels		$	60,797			$	59,083				3	%		$	218,032			$	209,979				4	%

Hotel EBITDA Analysis
(In thousands, except percentages)

		Three Months												Year
		Ended December 31,								%				Ended December 31,(1)								%
		2010				2009(1)				Change				2010				2009				Change
Morgans		$	1,174			$	677				73	%		$	1,811			$	490				270	%
Royalton			1,390				1,550				-10	%			2,015				1,971				2	%
Hudson			7,002				5,143				36	%			17,432				13,142				33	%
Delano			3,374				3,694				-9	%			13,169				14,123				-7	%
Mondrian LA			2,193				1,409				56	%			10,349				9,039				14	%
Clift			633				234				171	%			1,844				316				484	%
Owned Comparable Hotels			15,766				12,707				24	%			46,620				39,081				19	%
St Martins Lane			1,968				1,884				4	%			5,867				5,242				12	%
Sanderson			1,334				1,119				19	%			3,972				3,204				24	%
Shore Club			11				83				-87	%			218				328				-34	%
Mondrian South Beach			159				(54	)			-394	%			92				(1,232	)			-107	%
Joint Venture Comparable Hotels			3,472				3,032				15	%			10,149				7,542				35	%
Total System-Wide Comparable Hotels			19,238				15,739				22	%			56,769				46,623				22	%
Hard Rock — Joint Venture			645				(1,183	)			-155	%			3,162				1,348				135	%
Ames — Joint Venture			103				(123	)			n/m				114				(123	)			n/m
Total Hotels		$	19,986			$	14,433				38	%		$	60,045			$	47,848				25	%

Adjusted EBITDA and Debt Analysis
(In thousands)

		Adjusted
		EBITDA
		Twelve Months
		Ended				Outstanding Debt at
Consolidated Operations		Dec. 31, 2010				Dec. 31, 2010
Morgans			1,811
Royalton			2,015
Delano			13,169
Sub — total for Hotels Securing Revolver			16,995			$	26,008
Hudson			17,432				227,662
Mondrian LA			10,349				103,496
Management Fees			18,338
Corporate Expenses			(23,651	)
Other Debt (1)			—				224,468
Total		$	39,463				581,634
Less: Cash							(5,250	)
Net Debt						$	576,384