Morgans Aims to Keep Its Cool

Ian Schrager has turned his name into a synonym for "hip," first as a co-founder of New York hotspot Studio 54 and then as the creator of some of the most fashionable boutique hotels around, such as the Delano in Miami and the Mondrian in Los Angeles.

Now, the company he founded, Morgans Hotel Group (MHGC), faces the challenge of maintaining the hipness of those hotel brands and expanding their reach without the help of Schrager, who has moved on to other pursuits.

After going public in February at $20 a share, Morgans has seen its stock drop to around $14.50, partly due to concerns over its recent purchase of the Hard Rock Hotel in Las Vegas, which brought on a lot of debt and a slew of questions from investors. The company reported a loss of $30 million in 2005 and hasn't given guidance for this year, though analysts expect a profit of 16 cents a share.

Hovering in the background, though, may be a bigger issue. In a business where branding is everything, can Morgans' current chief executive, who has spent his career in real estate finance, carry on the artistic vision of Schrager?

Many credit Schrager with starting the luxury boutique concept when he first built the Morgans Hotel in New York City in 1984, after serving a jail sentence for tax evasion stemming from the unraveling of Studio 54.

Schrager's vision was to create a new type of hotel, one that centered on chic bars and restaurants which became popular social gathering spaces.

He later went on to build the Mondrian on Sunset Strip in Los Angeles and the super-deluxe Delano in Miami's fashionable South Beach area, along with the Royalton and Hudson hotels in Manhattan (these all remain part of Morgans' 10-hotel portfolio).