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ANNUAL REPORT 2013 Dear Fellow Shareholders, 2013 was a year of meaningful change for Morgans Hotel Group as your new Board of Directors and management took significant, decisive actions to position the Company for the future. In a year after shareholders voted in favor of replacing the previous Board of Directors, your new Board fully immersed itself in all aspects of the Company and its business. This thorough review confirmed what we always knew – that the potential for value creation of our one-of-a-kind properties and powerful brands is significant. In order to recognize that value for our shareholders, your new Board first needed to address a number of legacy issues related to our balance sheet, corporate overhead levels and organizational structure. We have also spent significant time with our existing partners to ensure the success of new projects soon to open while assessing potential new projects for the continued growth of property management income. Since the 2013 annual meeting, we have made significant progress on a number of critical initiatives that have strengthened our company and laid the groundwork for value creation going forward. These efforts could not have been completed without the full participation of every member of the Board, and we have drawn on their considerable industry, operational and capital markets expertise in order to affect successful outcomes for our investors. We significantly strengthened our balance sheet, which has resulted in increased liquidity and flexibility. In February 2014, we refinanced our $180 million mortgage loan secured by Hudson New York and our $100 million revolving credit facility secured by Delano South Beach, replacing these obligations with nonrecourse mortgage and mezzanine loans at attractive rates. These facilities were carefully structured to maintain flexibility while taking advantage of accommodative capital markets. Our financial performance has improved, as 2013 adjusted EBITDA nearly doubled over 2012 levels, reaching more than $45 million. RevPAR for system-wide comparable hotels increased more than 8% in 2013 over last year, primarily driven by a 7.8% increase in occupancy. At Hudson, a non-comparable hotel, we completed a $33 million renovation project in 2013, which included the addition of 32 rooms. With all newly renovated rooms and two new food and beverage venues, adjusted EBITDA at Hudson grew by approximately $10 million in 2013 and we expect it to continue to ramp up in 2014. Given the size of this asset, and its relative contribution to our portfolio, we believe there has been large value creation at the company level from the repositioning of this asset alone. Additionally, as part of an extensive review of the Company’s operations, our Board took the difficult but necessary steps in order to right size our cost structure and reduce corporate overhead costs allocated to property owners. These actions are expected to achieve annualized savings of approximately $10 million, which include corporate expenses and expenses allocated to the Company’s owned, joint venture and managed hotels, based on 2013 incurred costs and targeted compensation levels. With a stronger balance sheet and improved financial and cost structure, we now have the runway to continue to successfully execute on our property management and “asset-light” strategy. We are keenly focused on efficiently managing our portfolio properties and securing new long-term management agreements in attractive domestic and international markets. The operating leverage that comes with growing our management fee and licensing income, while continuing to right size our already meaningfully reduced overhead costs, is significant. As of March 1, 2014 we have signed agreements for seven managed hotels as well as license or franchise agreements for two additional hotels. The capital to fund these projects has already been either funded or raised, and the incremental cash flow from these openings will begin to appear in 2014. The Company also continues to enhance the value of existing hotels and management agreements through targeted renovation and expansion projects. These capital commitments have to meet or exceed well defined internal return thresholds established by your new Board, and are assessed constantly. We have also seen an increasing amount of interest in our brands, both domestically and abroad, with opportunities to extend our flags to new developments and existing properties in major gateway cities. This is a testament to our brand equity. The progress we have made in less than a year is significant, and the value in our strategy has been reflected not only in these achievements, but in the market as well. Today we are a stronger, more efficient company with a more carefully honed strategy and a renewed focus on building shareholder value. We have an incredibly talented group of dedicated employees and a Board that is willing to take the necessary steps to recapture Morgan’s entrepreneurial spirit and restore our company to its rightful place as the world’s leading international boutique hotel platform. Importantly, our Board is entirely aligned and steadfastly committed to evaluating all available alternatives to enhancing the Company’s value and further advancing the interests of Morgans Hotel Group’s shareholders and broader stakeholders. Finally, I want to thank our employees, whose dedication, skill and commitment to providing superior service and authentic, one-of-a-kind boutique hotel experiences to our valued guests around the world are the lifeblood of our organization. I would also like to thank our shareholders for their ongoing support and confidence in Morgans Hotel Group. Sincerely, Jason Kalisman Chairman and Interim Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) _ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33738 Morgans Hotel Group Co. (Exact name of registrant as specified in its charter) Delaware 16-1736884 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 475 Tenth Avenue New York, New York 10018 (Address of principal executive offices) (Zip Code) (212) 277-4100 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.01 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No _ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No _ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes _ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer _ Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No _ The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was approximately $218,452,534, based on a closing sale price of $8.06 as reported on the NASDAQ Global Market (formerly the NASDAQ National Market) on June 28, 2013. As of March 12, 2014, the registrant had issued and outstanding 33,777,062 shares of common stock, par value $0.01 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of Morgans Hotel Group Co.’s Proxy Statement in connection with its Annual Meeting of Stockholders to be held in 2014 are incorporated by reference into Part III of this report. INDEX Page PART I ITEM 1 BUSINESS.......................................................................................................................................... 5 ITEM 1A RISK FACTORS.............................................................................................................................

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