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Morgans Hotel Stock Slides on Losses

Morgans Hotel Group trades lower after the developer of boutique hotel properties posts wider-than expected losses.



) -- Shares of

Morgans Hotel Group


traded lower Friday after the developer of boutique hotel properties in U.S. and European gateway cities posted wider-than expected losses.

The all-important figure of revenue per available room, or revPAR, surged 13.3%, led by a 23.1% increase in Morgans Hotel Group's New York-based hotels, its flagship market.

Still, net losses more than doubled what Wall Street analysts had expected, and disappointed investors bid Morgans Hotel Group shares down 5.4% in afternoon trading Friday, off earlier lows.

The strong revPAR gains were driven by rising occupancies and average daily room rates, which showed positive growth for the first time since 2008, said CEO Fred Kleisner.

Occupancy, revPAR and average daily room rates have suffered across the hotel sector since 2008 amid the global financial crisis.

The typical recovery cycle in the hotel industry begins with a return in demand, Hudson Securities analyst Robert A. LaFleur told


Thursday when discussing quarterly results from

Hyatt Hotels

(H) - Get Hyatt Hotels Corporation Class A Report

. Higher demand then re-inflates occupancy rates to a point where hoteliers can comfortably raise rates. That provides a compounding effect to revPAR recovery, or what LaFleur calls "the double whammy" of increasing occupancy and room rates.

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"Despite concerns in the broader market about economic recovery, its sustainability and the possibility of a double dip, we're not seeing evidence in hotels that the recovery is running out of gas," he said. "In many ways it's accelerating."

That bodes well for firms like Morgans Hotel Group, and despite its widening losses, higher revPAR led the company to grow quarterly revenue by double-digit percentages to $60.2 million year-over-year, topping expectations.

If Morgans Hotel Group is able to drive revPAR growth of 8% to 10% in 2010, the hotelier expects adjusted earnings of up to $55 million for the year, higher than the $52.4 million analysts expect.

Hyatt, which beat earnings expectations but missed top-line estimates for the second quarter,

grew revPAR nearly 10% in the second quarter

, including an increase of 6.8% at North American properties and 21.4% at international locations. Occupancy rose to 74.5%.

>>Hyatt Misses, Poised to Improve

Fellow small-cap hotelier

Orient-Express Hotels


, the owner or part-owner of 50 hotel and travel properties in 24 countries, including deluxe hotels, grew revPAR last quarter in every region it operates.

>>Orient-Express Shares Play Catch Up

Morgans Hotel Group grew revPAR by 18% at its London hotels, 9.8% in Los Angeles and 0.3% at its Miami hotels. 

Morgans Hotel Group, a part owner of the Hard Rock Hotel & Casino in Las Vegas, booked second quarter losses of $21.1 million, or 76 cents per share, compared with year-earlier losses of $10.1 million, or 34 cents per share. Analysts' consensus call had been for loss of just 35 cents per share.

-- Reported by Miriam Marcus Reimer from New York.


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