Hawaii developer Peter Savio is moving forward on plans to expand his Pagoda hotel brand, which caters to kamaaina and college students looking for economical rooms.
Savio said Monday he has a verbal agreement to buy the Waiakea Lagoon View Apartments in Hilo, which he expects to turn into a 250-room, Pagoda-branded hotel and college dormitory. Savio also confirmed he is negotiating for another Pagoda hotel site in Kapolei near the University of Hawaii-West Oahu campus.
Savio bought the circa-1960s Pagoda Hotel & Restaurant in Pawaa at the end of 2010 from the HTH Corp. Now he expects to expand that brand by spending $25 million to acquire and renovate 200 of the 275 units in the Waiakea from an investor group. Eventually, if other individual fee-simple owners are willing to sell, Savio hopes to buy the remaining 75 apartment units in Waiakea.
His budget also includes building an additional 50 or so hotel units on a parcel of the property left vacant by a fire and refurbishing some 45,000 square feet of commercial space.
"I hope we would be ready to start in the next four to five months," Savio said.
Waiakea, which was originally built as a hotel, has been operated as an apartment building for several years, he said.
"I love the property," Savio said. "It’s a garden hotel built over streams and ponds. It was beautiful when it was built."
While Waiakea previously struggled as a hotel, Savio said he thinks it will thrive under the Pagoda brand.
"Our rates would be lower than other hotels," he said. "We’ll be very competitive."
Savio said he began eyeing Waiakea after several unsuccessful attempts to buy the nearby Naniloa Hotel in Hilo. While Savio said that he is still interested in acquiring Naniloa, any bid that he now makes would have to take into account his purchase of the Waiakea.
"Naniloa is of less value to us now because of Waiakea," he said. "We’re going to add about 250 hotel units to Hilo. We also are looking at having a number of restaurants and offices. There may be one or two gift shops."
Savio expects a steady stream of kamaaina and business visitors at Waiakea. Students and visitors affiliated with UH-Hilo, which is about four miles away, also will fill rooms, he said.
"In 10 to 15 years, I think UH-Hilo could grow to a 20,000-student campus," he said. "I know it sounds crazy to some, but I think we’ll see a lot of students from emerging markets like China and Korea."
Savio also expects to see strong college growth in Kapolei and is eager to position his college housing ahead of other offerings.
"There are two or three locations in Kapolei that we are zeroing in on," he said.
For starters, Savio plans to build a 200-room hotel and dorm with meeting space. Additionally, he said he’d like to build another mixed-use hotel/dorm on one of the parcels surrounding UH-West Oahu.
"I think that we’ll be tremendously successful," he said.
Savio already has had some success creating a mixed-use hotel and student housing model within the economy class of hotels on Oahu.
Earlier this year Savio and Kamehameha Schools, which owns the land under the Pagoda, announced plans to convert the Pagoda Terrace, a 162-room portion of the property, into moderately priced fee-simple condos. At the time, Savio said that the Pagoda’s main 12-story building with 197 rooms and the famed floating restaurant would remain, though one day it may be replaced by a new, bigger hotel.
Savio also has used his mixed-use model at his Waikiki hotels, which include the Ewa Hotel and the White Sands Hotel. He sees the Waiakea as an opportunity to continue developing dorm hotels and build a Pagoda brand across the state.
College students, as well as English as a Second Language (ESL) students, rent about 5 percent to 10 percent of the rooms in Savio’s hybrid hotels, which are managed by Aqua Hotels & Resorts, a brand that specializes in Hawaii’s budget boutique market.
"The students help fill in the occupancy rates," Savio said.
