An undisclosed ownership group has purchased the Ohia, a Waikiki dorm, and has plans to convert it into a budget hotel managed by the fast-growing Aqua Hospitality company.

Beth Churchill, chief revenue officer for Aqua-Aston Hospitality, said Tuesday that Aqua was recently awarded the management contract for the property at 2280 Kuhio Ave., which has been renamed the Ohia Waikiki.

Once an Outrigger-branded hotel, the property was most recently a college dorm owned by Marcus Fullard-Leo, who belongs to the family that used to own Palmyra and King’s Village. Peter Savio, Fullard-Leo’s former partner in the dorm, said one of Ohia’s new owners is Ben Rafter, the former head of Aqua Hotels and Resorts, who left the company following its merger with Aston.

"It was a very smart choice on Ben’s part. If I’d known this building was for sale, I would have bought it," said Savio, who got into the Waikiki dorm business when hotel demand was softer. "There’s a huge demand for affordable hotel inventory in Waikiki. We are still in the Waikiki dorm business, but we only have 80 dorm beds in Waikiki because hotel rooms are at very high occupancies."

The 27th Aqua-managed property will launch as one of the hotel company’s Aqua Lite collection, a group of nine eclectic economy hotels that are marketed to budget-minded travelers.

"What Aqua is most known for is taking unrenovated off-beach budget properties and working with ownership groups to renovate them and, in cases where it makes sense, to graduate them into our collection of higher-category properties," Churchill said. "We’ve been able to relaunch some 1.5-star properties as three- and even four-star properties."

Churchill said renovation plans for the 251-room Ohia Waikiki are still being firmed up.

"We’ve appointed a transition team to work with the new ownership group and we will be announcing plans for this property soon," she said.

Typically, Aqua Lite owners will invest in their properties to upgrade them into higher categories. However, Churchill said that in some cases, Aqua Lite owners choose to stay in the economy category.

"Peter Savio, who owns the Pagoda, does a great job in that category. His property is very popular with kamaaina travelers," she said. "The Maui Beach Hotel ownership group also wants to keep it affordable."

Churchill said other Aqua Lite hotels — which include Ewa Hotel Waikiki, Hilo Naniloa Hotel, Hokele Suites Waikiki, Maile Sky Court, the Polynesian Plaza and the White Sands Hotel — also are enjoying competitive advantages because years of market repositioning and growth have made budget properties relatively scarce.

"The Lite collection is a very good category to be in right now, especially in Waikiki," she said. "Exchange rates have affected booking patterns and people are a lot more rate-sensitive. I see a lot of potential for this property."

Through March, the average daily rate for a Waikiki hotel room was $212.84, according to hotel consultancy Hospitality Advisors LLC. However, the Ohia Waikiki, which already is being advertised on Aqua’s website, may be booked from June 26 with room rates starting at $171.

Joseph Toy, president and chief executive of Hospitality Advisors, said he expects the hotel conversion will be well received, as will Rafter’s return to Hawaii’s hotel industry.

"As the values increased at the Waikiki beachfronts with their initial repositioning over the last decade, we’ve started to see values increase up the Ala Wai into the secondary and tertiary hotel markets," he said. "Now, the off-beach properties along Kuhio Avenue and the Ala Wai Canal are able to afford renovations because they can get higher rates and their land values are higher and they can refinance or sell."

Toy said the coming Ohia Waikiki renovation will join the cluster of properties that began repositioning along Kuhio and the Ala Wai in the late 2000s. Toy said the Marriott Courtyard on Kuhio was one of the properties in the first wave and that the ongoing conversion of the Ohana West into a Hilton Garden Inn is a more recent example.

"Eventually, the second gateway of the International Market Place on Kuhio will drive even more activity to that area — we are already seeing it with the Ritz-Carlton Residences and the coming Waikiki Trade Center renovation," he said.

Toy said Rafter, who was instrumental in the growth of Aqua, knows the Hawaii hotel market well and will be able to drive additional value into the Ohia Waikiki.

"The destination benefits from Ben remaining active in the market," he said.