Cape Advisors Partners with Morgans to Create a Mondrian in Soho

150 Lafayette St. in the NYC SoHo Area to be a 270 room Mondrian Hotel

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. October 14, 2008

NEW YORK, NY, June 28, 2007. Morgans Hotel Group Co. (NASDAQ: MHGC) today announced a new joint venture with Cape Advisors Inc., a New York-based developer, to develop a Mondrian hotel in SoHo, Manhattan. Mondrian SoHo will be operated by MHG under a long-term management contract and is expected to open during the second half of 2009. The hotel is the sixth announced Mondrian, including Los Angeles, Scottsdale, and properties under development in Las Vegas, Miami and Chicago.

The joint venture will convert a property currently owned by Cape Advisors on Lafayette Street into Mondrian SoHo. The hotel is anticipated to have over 270 rooms, a bar and restaurant, as well as other amenities.

"Mondrian SoHo will be highly complementary to our existing portfolio of New York properties," said Marc Gordon, Chief Investment Officer of MHG. "Due to the popularity of the SoHo market, sites for new hotels are extremely rare, and we look forward to establishing a presence in one of the most desirable downtown areas. Furthermore, we expect Mondrian SoHo to benefit from cost savings, labor efficiencies and other synergies of the centralized operation of our three other Manhattan hotels: Morgans, Royalton and Hudson."

Ed Scheetz, President and Chief Executive Officer of MHG, said, "SoHo is downtown's most attractive location--a mix of fashion, industry, culture and nightlife set in the historic cast-iron buildings and cobble-stoned streets. Boutique hotels have performed extremely well in SoHo, and we are pleased to partner with Cape Advisors to open our first property in lower Manhattan."

Mondrian SoHo is expected to have significant space for a restaurant, bar, ballroom, meeting rooms, exercise facility and a penthouse suite with outdoor space that can be used as a guest room or for private events. The hotel is also expected to boast a street-courtyard, which would serve as the hotel entrance and outdoor dining space.

MHG contributed approximately $5 million for a 20% interest in the joint venture. Upon completion, MHG is expected to operate the hotel under a 10-year management contract with two 10-year extension options.

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 integration of the Hard Rock Hotel & Casino and other acquired 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 MHG's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, 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.