Hawaii developer Peter Savio has bought the Ewa Hotel Waikiki and with it plans to turn his Pagoda Hotel into an economy brand catering to students and kamaaina.

The purchase of the Ewa Hotel is expected to close March 1, Savio said. He bought the 97-room property at 2555 Cartwright St. for an undisclosed price from Ewa International, a Hawaii-based Japa­nese owner.

"We’re going to add the Ewa Hotel to our Pagoda collection," Savio said Thursday. Because it’s close to Kapiolani Community College, he will turn it into "another dorm-hotel combination."

Savio, who bought the Pagoda Hotel from HTH Corp. in late 2010, has had some success fulfilling the student and kamaaina niche markets within the economy class of hotels on Oahu. He also owns White Sands, a low-rise garden hotel in Waikiki that he converted for locals and students.

College and English as a Second Language (ESL) students rent about 5 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.

"Hawaii hotels typically operate with at least a 10 to 20 percent vacancy rate, so student rentals help fill in occupancy," Savio said. "You really don’t know the difference other than we’ve got a lot of young kids at our pool. The students mostly are gone during the day, and they tend to be very respectful. If they don’t follow the rules, they are out."

He sees the Ewa Hotel as an opportunity to continue developing dorm hotels and build a Pagoda brand across the state.

"When I bought Pagoda everyone saw it as a hotel. I saw it as a brand," Savio said. "We actually want to buy a number of additional hotels. I’d love to have a Pagoda Hilo and a Pagoda Kauai on the Lihue side."

Such a move would put Savio head to head with properties like the collection of hotels run by Seaside Hotels Hawaii, said Joseph Toy, president and CEO of hotel consultancy Hospitality Advisors LLC.

"There is a market for low-cost Hawaii resident travel, and Peter has proven that he is an astute hotel investor," Toy said. "He’s also been very successful servicing the university housing market."

While profits at budget hotels tend to be thin, Toy said Savio has proved his mettle in the market.

"He doesn’t pour a lot of money back into his hotels; he runs them lean," he said. "He reads the market well."

Savio said he views the Pagoda, with its floating restaurant and signature koi ponds, as the place to stay for business, sporting events and when visiting family on Oahu.

"It’s where people come to celebrate keiki luaus and grandma’s birthday and find a home away from home when they are coming in from out of town," he said.

While the Pagoda, which was built in 1964 by the late Herbert T. Hayashi, had been struggling in recent years, Savio said the property has turned around under Aqua.

"Reservationists have had to refer guests to other properties," Savio said. "Now we’ll be able to refer them to the Ewa Hotel."

Rooms at the Ewa rent for $85 a night; however, Savio said that Aqua might restructure the rates after the property replaces linens, carpets and draperies.

"It recently underwent an extensive renovation, so we’ll probably only have to spend a few thousand dollars per room," he said.

The margin for student rentals will be tight, Savio said. "If we raise rates by $10 or $15, we can get priced right out of the market," he said.

While there is always a shortage of student housing, Savio said competition from condominiums is fierce. Rents per Waikiki dorm bed go from $650 to $750 per bed per month. Next year they might go up by as much as $100 to $200 per month due to the spike in utility costs, he said.

"It’s cheaper to rent an apartment than a dorm, but we offer the support services that many students need," Savio said. "We’ve got resident assistants, hotel management and security on site, and we offer activities."