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Ed Scheetz: architect of disaster<\/em><\/p>\n It was with great swagger that Morgans Hotel Group<\/strong> captured the Hard Rock Hotel & Casino<\/strong> in 2006. Newbies to the Vegas market, Morgans has had a rough education during the intervening years. Its most recent quarterly report shows how losing less money<\/a> doesn’t mean you’re necessarily doing better. Casino revenue, never the strongest pillar of the HRH, was down 18%. Not only that, Morgans found itself flinging 849 new hotel rooms — a 130% increase — into a market that wasn’t exactly starved for new capacity. The local dailies put a positive spin on the story but Casino City Times<\/em> cut to the chase<\/a>.<\/p>\n A company whose self-proclaimed first order of business at the Hard Rock was to boost cash flows by increasing ADRs<\/a> saw them decline 29% last year and is going into 2010 offering rooms at newest, HRH Tower<\/strong> (midweek) at $29\/night. Between the $770 million purchase price and $750 million in expansions, Morgans and majority owner DLJ Merchant Partners<\/strong> — Morgans basically gave 87% of the HRH back to the bank in lieu of repayment — have spent the budgetary equivalent of a Strip resort … in a locale where the nearest rival casino is grind joint Terrible’s<\/strong>.<\/p>\n Devolution of Morgan’s role from owner to possessor of a glorified management contract means it earned a puny $7 million in management fees<\/strong> last year; not the kind of money you’d expect to earn from running a top Vegas hotel. As for Hard Rock cash flow, the return on Morgans initial investment has declined from 5% in 2008 to 3% last year. All in all, a dreadful performance by a company whose stock now trades at a fifth of its IPO price.<\/p>\n Following the tragic suicide<\/a> of HRH President Randy Kwasniewski<\/strong>, one is retrospectively shocked by the preponderance of disaster and disgrace that has fallen upon executives connected with the Morgans\/DLJ takeover. A sex scandal forced DLJ Merchant-in-chief Steven Rattner<\/strong> out of office. The drug-induced death<\/a> of then-Morgans CEO Ed Scheetz<\/strong>‘s girlfriend sent the executive’s career into eclipse, though he seems to have ridden the crisis out nicely. Unfortunately, the same cannot be said for the hotel on which he chose to risk his company’s future.<\/p>\n","protected":false},"excerpt":{"rendered":" Ed Scheetz: architect of disaster It was with great swagger that Morgans Hotel Group captured the Hard Rock Hotel & Casino in 2006. Newbies to the Vegas market, Morgans has had a rough education during the intervening years. Its most … Continue reading ![\"HRH](\"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-content\/uploads\/2010\/03\/HRH-LV.jpg\" "\\"HRH")
Morgans execs are talking about selling some of the land behind the hotel, acreage that was the graveyard of former owner Peter Morton<\/strong>‘s condo-building aspirations. That may be difficult for several reasons, starting with the fact that 11 acres are pledged as security against a rolling series of loan extensions. Also, the land’s commercial value is — how shall one put it? — extremely difficult to discern, as it’s cut off from Harmon Avenue and only accessible from Paradise Road via a long, winding driveway. In short, it’s an isolated parcel without “curb appeal” because it has no curb. One presumes the bankers accepted it as collateral because everything of value had already been pledged.<\/p>\n