The Russian resort city of Sochi: the two sides of the Olympics Medal

At present, the Sochi Olympics is one of the most discussed topics in the press, with more emphasis focused not on the Games themselves, but their budgeted costs. According to various data, the Sochi Olympic Games are expected to cost from 330bln rubles to 1trln rubles (or about $10bln to $35bln), an astronomical figure, which will make the Sochi Games the most expensive ever in all the Olympics history. 

In the current millennium, only two cities have hosted the Winter Games, Salt Lake City in the United States in 2002 and Turin in Italy in 2006, while Canada’s Vancouver is currently finalizing its preparation to host the global sporting events in 2010. The resources expended on all these Games are, on average, three-four times less than the ones currently being planned for Sochi in 2014.

Why is the Sochi budget so high?

Of course, one needs to take into consideration the fact that the constructions of the Olympics arenas and other related infrastructure in Sochi started from scratch. This is because the city needed to build not only top-quality sports objects for the Winter Games competitions, hotels for visitors and the Olympics Village for the Games participants, but also to improve its transportation system, including railway, where notably, there is currently just a single road connecting the city center to Adler. Besides, the rapidly growing city will also need to build more electricity and other related infrastructure to ensure adequate power supply. 

“The Sochi Olympic Games are expected to cost from 330bln rubles to 1trln rubles (or about $10bln to $35bln), an astronomical figure, which will make the Sochi Games the most expensive ever in all the Olympics history.”

In total, 12 new sports objects will be built in Sochi, out of which the construction of six arenas has already started. Also under active construction are roads, railways and an additional runway in the city’s airport. Apart from these sports objects in Sochi and Krasnaya Polyana, it is also planned that up to 50 hotels offering 21,000 new rooms of different star categories will be built. 

However, Russian Prime Minister Vladimir Putin said the Sochi’s 2014 Games budget was inflated, a point of view that that is difficult to disagree with it, given the fact that Italy’s Turin, for example, also built a new underground tube (metro) from scratch as a part of its preparations for the 2006 Games. But the Turin’s gross expenses are three times less than the current budget for the Russian Sochi Games, a phenomenon that economic analysts have attributed to three key problems in the country, namely, rampant corruption, absence of true competition and lack of modern technologies. 

What will happen to these facilities in post-Olympics Sochi? 

We need to take into consideration the fact that Sochi is preparing not only just to host the 2014 Olympic Games, but also to become a key international summer and winter resorts destination for local and global travelers. This is because after 2014, the city’s new infrastructure will allow it to receive lots of tourists, the city’s international airport will have a new runway and new seaports and other resort infrastructure will appear on its over 145km seashore. 

Certainly, the new skiing resorts such as the Rosa Khutor Complex and the Alpica Service Resort will be able to attract lots of tourists, both locally and from abroad. However, without well-planned advertisement, the presence of highly developed infrastructure, comfortable hotels and modern resorts will not be enough to ensure the success of the Sochi tourist industry. The Olympic Games will definitely draw everyone’s attention to Sochi and showcase its best qualities to the whole world, thus proving the city’s readiness to receive, impress and entertain both local and foreign tourists. 

The prospectuses and tourist leaflets should contain all vital information concerning the Sochi ski resorts. In this regard, cooperation with foreign tourist companies should move to a new, higher level. Here, it is important not only to attract tourists, but also travel agencies, a policy that will require the development of quality communication ties in the international tourism industry. By the way, Barcelona became one of the most popular international resorts after hosting the Olympics in 1992. In this case, the construction of new hotels and development of new ski resorts in Sochi is more than justified. 

So, the ultimate question: what is going to happen to these sports facilities?

The government intends to use these sports facilities for a variety of purposes. First and foremost, it plans to use the central Olympic Stadium as a football arena, which in this new capacity, can host matches of the Russian Football Championship as well as different matches of World and Europe Championships. Similarly, the Grand Ice Arena and the Small Ice Arena will be used to host multipurpose sports, concerts, etc. The Sochi population is not very large, compared to the populations of Russia’s so-called ‘million-citizen’ cities. Therefore, till Sochi expands to the level of these other big cities, it will probably not be very attractive to foreign entertainment stars and celebrities.

The new arenas, constructed in accordance with the latest trends in architecture and fashion, have fully satisfied all the necessary technical requirements for such shows. Many Russians usually come to Moscow to listen and see their idols, why can’t they also come to Sochi? If the Grand Ice Arena is too big to host such events, the Small Arena can be used. Also, the Ice Skating Center can be used as an exhibition facility, while the Ice Stadium can serve as a business and expos center. Many people are used to the fact that Moscow is the country’s basic business center. However, after the completion and delivery of the new objects in Sochi, the city can host some of the exhibitions and events on different topics. Similarly, the Curling Arena can become a training base for the Russian Olympic and Paralympic Committees, the sledge and bobsleigh track can serve as venues for international competitions and as a national training base, while the Rosa Khutor Complex, Alpika Service Resort and Mountain Skiing Center can host international competitions, national training base, and as already mentioned above, provide tourist services.

Many experts currently regard these plans as utopian, but a careful examination will show that they are very realistic. For one, the transportation to and from Sochi will become much simpler, faster and more affordable, while its social and business infrastructure will improve significantly. These newly built objects will enhance the development of business, culture, tourism and economy in the city. Such comprehensive development would help to significantly decongest Moscow by diverting some of its business to the resort city, thus helping Sochi to simultaneously solve its unemployment problems.

What has been done for the local residents?

It is of paramount importance to note here that not only government’s money has started flowing into Sochi following its declaration as the venue for the Winter Olympic Games in 2014. Indeed, several non-state investment funds and private equity investors, hoping for growth of tourists and migrant workers, and hence new business opportunities, have funneled huge capital into development of the city and its urban facilities. 

“According to the official development forecasts, over 2.1mln sqm of housing will be built in Sochi in 2009-11, raising the city’s housing per capita to 20.8sqm by 2011. For comparison, this index in Moscow stood at 21.0sqm in 2008.”

Specifically, lots of construction companies have put all their stakes on the ‘new’ Sochi city, as the Winter Games will provide it with new roads, resorts, hotels, sports objects, etc. Therefore, it is quite probable that many people will choose Sochi, a traditionally beautiful old city, which will now be entirely new in terms of facilities, for their summer and winter holidays. Acquisition of housing has always been a key issue in resort cities. In the case of Sochi, this means the development of all the facilities, including more residential housing projects, which are necessary for quality living, and hence, the Games will significantly help improve the residents’ lifestyles and living standards.

For instance, there were about 1.4mln sqm of residential housing projects under construction in 2008. The largest volume was the economy class segment (39%), followed by business-class segment, at 34%, and the first-class segment, accounting for remaining 27%. Some of the projects in the so-called ‘elite segment’ include the Millennium Tower, Novaya Alexandria, Korolevsky Park, Ideal House, Krasnaya Ploshchad and Premier, to name just a few. 

According to the official socio-economic development forecasts, over 2.1mln sqm of housing will be built and delivered in Sochi between 2009 and 2011. Broken down, this translates into 618,500sqm of housing in 2009, 714,700sqm in 2010 and about 769,800sqm in 2011. This will raise the housing per capita index in Sochi from 18.2sqm in 2007 to 20.8sqm in 2011. For comparison, this index in Moscow stood at 21.0sqm in 2008, and this means that the acute housing problems in Sochi are being solved gradually.

* The author is the chairman of the National Institute of Sustainable Growth Assistance and Improving Living Standards