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12/5/2011 6:15:01 PM
Morgans Hotel Group Co. ( MHGC ) recently penned a 25-year management agreement to develop and manage a Mondrian-branded hotel in London. The agreement has a 10-year extension option. Per the deal, upon completion and inauguration in early 2014, Morgans will continue to operate the hotel.
The property is strategically located at Sea Containers in London to draw business and leisure travelers throughout the year. Morgans plans to inject approximately $15 million into the project.
This represents the first Mondrian hotel in Europe and the sixth in the company's brand portfolio. Earlier this year, Morgans entered into hotel management agreements for Mondrian-branded hotels in Doha, Qatar and in Nassau, Bahamas.
Morgans Hotel relies on three of its key brands, Hudson, Mondrian, and Delano, to drive its future expansion. Each of these brands has a clearly defined target customer as well as a distinct individuality. Among these, Mondrian is an aspirational brand having significant potential for worldwide growth.
As for geographic location, Morgans' development pipeline remains focused on Europe as its brands appear quite in harmony with the region. Apart from Europe, the company's current focus is on the US, Europe, and the Middle East as well as the key cities in South America and Asia.
We see the recent agreement in Europe as a bold move as the nagging debt-crisis is squeezing credit availability to a great extent.
Apart from the expansion, Morgans Hotel recently completed the sale of two hotels in London. With the $73 million in proceeds from this transaction, Morgans has approximately $150 million in total liquidity and a balance sheet capable of supporting growth. Morgans Hotel, which competes with the likes of Wyndham Worldwide Corporation ( WYN ), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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