Sochi Rides High, on Back of Olympic Win
By Sonya Rinkus
When it was announced on July 4 that Sochi had the winning bid in the 2014 Winter Olympics, some partied, some scraped their jaws off the floor and many rushed with money in hand to invest in Russia’s Southern region. After all, there’s only seven years left to bring a malnourished Soviet resort city up to Olympic standards.
Olympic considerations aside, the Krasnodar region had already been earmarked by the government for development, so that Russia could have its own world-class resort facilities. The Black Sea was a favorite holiday destination of the Soviet elite, due to its astounding natural beauty and relative proximity. However, the area lacks adequate infrastructure for transportation, telecommunications, accommodation and even skiing. In 2006, a federal target program was created to funnel $12 billion into Sochi, regardless of the success of the Olympic bid (although if it failed, the funds were to be reduced to $6 billion). Russia’s largest corporations — Basic Element, Interros, Gazprom — all pledged money to help develop the ski centers, hotels and tourism facilities needed to turn Sochi into the “Russian Riviera.” Billionaire Oleg Deripaska’s purchase of the dilapidated Sochi Airport last November bolstered Russia’s Olympic campaign, as did the personal involvement of President Putin (who owns a summer residence in Sochi). In the end it all added up to Olympic victory, the catalyst to radically transform the Krasnodar region.
All the alpine events of the Winter Games will be held at Roza Khutor, a ski resort currently under construction in the Krasnaya Polyana mountains. Interros head Vladimir Potanin, who recently upped his investment in Roza Khutor from $500 million to $1.5 billion, has hired Roger McCarty, Co-President of Vail Resorts’ Mountain Division, and renowned course designer Bernard Russi to ensure the quality of the slopes. By 2007, nine lifts are expected to be open for winter sports enthusiasts.
Most Russians however, associate Sochi with summers on the coast rather than winters in the mountains. State-of-theart resort complexes, such as the 100,000 square meter Karmelia Health Spa greenlighted for development by Sistema-Hals, will accommodate tourists year-round. “The project will include a 100-meter tower, which will be taller than any existing building in Sochi,” said Sistema-Hals president Felix Yevtushenkov in a press release. French hotel chain Club Med, whose name is synonymous with luxury, is also considering a high-end holiday village in the area.
In addition to recreational facilities development, Sochi will undergo a dramatic overhaul in all sectors of its economy. In its Olympic bid, the Russian government has promised to construct a sea port for cruise ships, to double the capacity of its airport to provide 25,000 more hotel rooms, to improve sewage treatment facilities, to institute a Moscow-Adler railway line and light rails within Sochi, and to invest $1.3 billion in new power generation plants.
Residential real estate is a popular market for speculators without a spare $100 million who still want to join the Sochi rush. In the last five years, property prices grew ten-fold and are expected to increase 15-20% annually in the seven years leading up to the Olympics. Real estate agency Negotsiant reports that residential prices in the most elite parts of Sochi are reaching Moscow levels — $4,350 per square meter in the center. While profits will certainly decrease after 2014, property is still a wise investment, as the transformation of Sochi into a first-class resort destination will last far beyond the Olympics.