Morgans Hotel Group Co. Closes Acquisition of Scottsdale, Arizona Hotel; Company to Re-Brand and Reposition Hotel as Mondrian Scottsdale

Business Wire, May 4, 2006

NEW YORK -- Morgans Hotel Group Co. (NASDAQ: MHGC), a fully integrated hospitality company that operates boutique hotels in gateway cities under well-known brands such as Delano and Mondrian, today announced the closing of its acquisition of the 194-room Mondrian Scottsdale, formerly known as the James Hotel. The final purchase price of $47.8 million was financed using available cash. The Company expects to enter into mortgage financing secured by this property in the near future.

The hotel will undergo renovations, which are expected to be completed by year end, to create the Company's distinctive lodging, spa and dining experience including: Agua Bathhouse, Skybar and Jeffrey Chodorow's critically acclaimed, Asia de Cuba. The hotel will remain open during this period. Don Jacinto, previously the Hotel Manager at Hudson in New York since June 2002, has been promoted to General Manager of Mondrian Scottsdale. Don has been instrumental in building and developing every aspect of Hudson's business and customer experience. MHG's appointment of a key executive from one of its most respected New York properties emphasizes Morgans' commitment to the success of the new Mondrian Scottsdale, the first extension of the Mondrian brand.

W. Edward Scheetz, President and Chief Executive Officer stated, "We are excited to close this transaction and are confident that over time we can dramatically enhance the profitability of the hotel. We expect to be able to generate attractive value for shareholders post-renovation by applying our intensive asset operational focus and leveraging our larger sales team and recognizable Mondrian brand."

Forward-Looking and Cautionary Statements

Statements contained in this press release, which are not historical facts, are 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. These forward-looking statements are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors which include, but are not limited to, downturns in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; risks related to natural disasters, such as earthquakes and hurricanes; the completion of transactions and the integration of properties with our existing business; the seasonal nature of the hospitality business; changes in the tastes of our customers; increases in real property tax rates; increases in interest rates and operating costs; general volatility of the capital markets and our ability to access the capital markets; and changes in the competitive environment in our industry and the markets where we invest, and other risk factors discussed in Morgans Hotel Group Co.'s Annual Report on Form 10-K and other documents filed by the Company with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of today, based upon information known to management as of the date hereof, and the Company 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.

About Morgans Hotel Group

Morgans Hotel Group Co. (Nasdaq: MHGC) which is widely credited with establishing and developing the rapidly expanding boutique hotel sector, owns and operates Morgans, Royalton and Hudson in New York, Delano and The Shore Club in Miami, Mondrian in Los Angeles and Scottsdale, Clift in San Francisco, and Sanderson and St Martins Lane in London. MHG has other property transactions in various stages of completion including projects in Miami Beach, Florida, and Las Vegas, Nevada, and continues to vigorously pursue its strategy of developing unique properties at various price points in international gateway cities in the United States, Europe, South America, Asia and around the world. For more information, please visit www.morganshotelgroup.com.