Money-Growing: Port City Claims Sports Title

The organizers plan to build all the necessary sports facilities from scratch. Meanwhile, the international jury is to decide on the choice of venue as soon as in twelve months. It remains unclear whether Sochi will still benefit from taking part in that race, even if its bid is rejected.

The initiative of the Sochi city government received support of the federal center. A special bid committee – Sochi 2014 – was established to promote Russia’s Black Sea resort abroad in the months left till July 2007 when the International Olympic Committee is to elect the host city.

In the course of the next seven years Sochi and its countryside will see active development of sports facilities and engineering infrastructure. Enormous amounts of cash will be spent on those projects. The bid committee has put the total cost of the project at 327.2 billion rubles (approx. $12 million), of which 199.5 billion rubles will be provided by federal and regional governments while another 127.7 billion by private and public sources.

10 percent of the funds to be allocated under the federal target-oriented plan will be used to finance construction of sports facilities. Funds will also be allocated to improve the city’s worn-out road infrastructure, which has seen no capital repairs overhaul since the 1950s.

Seaside Stadiums

For many years Sochi was seen by most Russians as a sea resort where one could listen to the wash of the waves, not to the buzz of thousands of jubilant fans filling gigantic stadiums. But the ski resort of Krasnaya Polyana, situated within several kilometers’ distance from the sea has always been associated with sports and recreation, patronized in winter months by skiers who claim the Sochi countryside is the best skiing site in Russia and by mountain bikers in summer. In several years from now Krasnaya Polyana, too, will get a new look, along with all the countryside compounds in the vicinity – Grushevaya Polyana, Esto Sadok, Roza Khutor, which are to be transformed into a state-of-the-art winter sports arena.

Over the past years investors of all hues -- from small privately-owned firms and medium-size businesses to giant corporations Interros and Gazprom -- have been pouring cash into Sochi and its vicinity. The city is rapidly turning into a European resort with top class lodging facilities by no means inferior to Moscow’s five-star hotels, modern beaches and trendy shops. Authorities in Sochi and Krasnodar Region have been particularly active in raising investment for the region since the early 2000s. The local government, it seems, have set their mind on raising as much investment as possible. Krasnodar, indeed, ranks as one of the most successful regional economies in Russia. The region is a permanent exhibitor at international property investment shows in Cannes.

Several years ago, the regional authority launched a joint-stock investment fund modeled on the partnerships between the government and the private sector widely practiced abroad. The government acts as a partner in the Krasnodar fund with a 30% stake, offering financial guarantees to private investors, thus alleviating their risks.

Sochi is gradually turning into the Pearl of the Krasnodar Region. The city and the region claim the place at the top. Sochi’s development plan enjoys support of the federal government. For, if Sochi wins the bid it will be given a chance to become the most comfortable and exquisite sea resort and a leading sports training site in Russia. It will go down in history of world sports. The city will have other advantages, as it will attract larger investments both at home and abroad, in addition to the cash it will receive to prepare the city for the Games.

The IOC’s executive board is to announce a shortlist of candidates in near future. Seven cities have filed applications, Dmitry Chernyshenko, chairman of the Sochi 2014 committee has reported. “Out of seven cities - contenders only 3 or 4 will be included in the shortlist,” Chernyshenko says. “The host city will be named in July of 2007, in Guatemala.” But before that happens Sochi is to complete a number of preparatory procedures – to win a place on the shortlist in June 2006, send a bid book to the IOC and pass the test during an inspection visit of an IOC delegation to the city. Other applicant cities are Salzburg, Jaca, Almaty, PyeongChang, Sofia and Borjomi.

The Cost of Image

In 2002 Salt Lake City, Utah, United States hosted the scandal-ridden Winter Olympics. The Olympic Games are an international multi-sport event taking place every four years and comprising summer (held since 1896) and winter games (held since 1924). The most recent winter event was hosted by Turin, summer games were held in Athens.

Competition between the cities for the role of a host usually begins years before the Games. Smaller towns elected as Olympics hosts are given a good chance to boost development, larger cities and capitals take the advantage of publicity provided by the Games. Competing in the 2004 Games held in Athens were 11,099 athletes representing 202 national sports committees.

Moscow hosted the Olympic Games in 1980. The U.S., West Germany, Japan and over sixty other nations refused to compete in the games protesting the Soviet invasion of Afghanistan. Nevertheless, 6,000 athletes from 81 countries arrived in the Soviet capital where 36 world and 39 European records were set and 74 renewed.

Moscow had contended for the role against the U.S.’ Lake Placid, which was offered a chance to host the Winter Games. Los Angeles, another applicant, had spent $54,000 on preparing the bid. The choice of Moscow as the Games’ venue may be put down to the Soviets’ readiness to hold the event “as soon as tomorrow” in their main city universally recognized as the capital of the leading sports nation and a cultural center.

Before 2014, more Games are to be held across the globe. In 2008, Beijing will host Summer Olympics. China has pledged to spend $37 billion on the event. The 2004 Games had cost Athens $12 billion. Beijing is set to spend some $2 billion on modern hi-tech equipment for sports facilities. $2 billion will be spent on the development of sports facilities and $31 billon on improvements to city and road infrastructure.

Vancouver will host the Games in 2010. London has won the bid to host the 2012 Summer Olympics. Five cities had filed their bids to host the 2012 event. Moscow had intended to spend $10 billion on the project. But its bid was not successful. Russia hosted the Olympics only once, in 1980, as part of the Soviet Union. Great Britain had filed four bids and only London succeeded. Birmingham applied in 1992, Manchester in 1996 and 2000.

Olympic Games give a host country a chance to boost its image. Beginning 1984 the Games are bringing good returns. Britain’s GDP is expected to grow $1.339 billion (0.06%) over the next twelve years, according to a study by Paul Dales, a Capital Economics economist. After the International Olympic Committee announced in Singapore that London had edged out the favorite Paris to host the 2012 Games shares of British companies jumped on the London Stock Exchange.

But some hosts have been less successful. Athens spent $10 billion on organization of the 2004 Games but most of the sports facilities built in the run-up to the event now stand idle without brining any returns. Taxpayers in Montreal, Canada, still cover the government’s huge losses. Having lost $1.2 billion after the Games the authorities introduced a special tobacco tax.

Seeking to host the 2012 Games Moscow had been planning to build over 2.4 million square meters of covered sports facilities, worth 43 billion rubles. Redevelopment of existing properties was estimated to be worth 5 billion rubles, according to Moscow’s bid committee. Construction of stadiums and other sports facilities is usually financed by privately sector companies. Engineering infrastructure is funded by the government. The Fourth Ring Road of Moscow was conceived as part of the city hall’s plan to prepare the city for the Olympics.

“Hosting the Olympics offers a powerful economic stimulus to the host city and the entire country,” holds Dmitry Chernyshenko. “The Games make it possible to open the country for tourists and new investors, boosts the country’s image. The Olympics is a paying project as costs are offset by proceeds from the sale of television broadcasting rights, sponsorship revenues, sale of tickets.”

Sport As Business

Businessmen have always been taking the most active part in international sporting events. Vladimir Potanin, head of Interros, has been financing the development of the Krasnaya Polyana ski resort and is a co-founder of the Foundation to Support Russian Olympic Team. Other co-founders are Alexander Abramov of Evraz, Vladimir Lisin (NLMK), Viktor Vexelberg (Renova), Pyotr Aven (Alfa Bank), Oleg Deripaska (Basel) and Roman Abramovich.

Last year, Russian entrepreneurs made a valuable gift to the athletes on the occasion of the Day of National Unity. They established the foundation and transferred over $30 million into its account. Companies Evrazholding, Sibneft, Alfa Group, Lukoil, Surgutneftegaz, TNK-BP, Russian Aluminium, AFK Sistema, Banking House St. Petersburg and Interros Group took part in the project.

Analysts believe that in helping the athletes businessmen assume the functions of the government. Alexei Makarkin, deputy head of the Center for Political Science think-tank, believes that not every sport may count on voluntary sponsorship support. While, for example, football, given its tremendous popularity, needs no publicity campaign, track-and-field athletes may expect financial assistance only from of their avid fans who are much fewer.

In 2005, chemicals tycoon Alexei Fedorychev, who heads Fedcominvest (specializing in sale of fertilizers, with an annual turnover of $2 billion and shares in Dinamo and Rostov football clubs) signed an agreement with Leonid Tyagachyov, chairman of the Russian Olympic Committee, whereby the group undertook to transfer $110 million to the ROC in the years 2006 to 2014.

The deal timed to the 2006 Games in Turin will expire by 2014, at the time the Games are held. Leonid Tyagachyov says that earlier the committee had to raise funds for preparing the athletes for competitions. Before the Winter Olympic Games in Turin the body had raised over $10 million. Henceforth, cash provided by Fedorychev’s holding will be distributed between various sports federations. Part of those funds will be used to develop a winter sports center in Krasnaya Polyana. In exchange for financial support, the group is granted the status of the official sponsor of the Games.

Sochi is Ready and Set to Go

Sochi had first applied for the right to host the Winter Olympics in 1994 but lost to Lillehammer, Norway. Nowadays, the resort has been entrusted with a new mission both of regional and federal importance, for it depends largely on Sochi whether Russia will host the Games again, for the second time in its history. What speaks in favor of Sochi’s bid is its unique nature, with magnificent mountainous landscapes and subtropical seacoast, and future sports venues that will be developed to meet international standards, according to the program of the bid committee. The government is currently working on the federal plan to support Sochi’s bid. 84 percent of Sochi residents voted in favor of hosting the Olympics.

The Sochi authorities hope that the Games will transform the city into a world-class mountainous resort attracting up to 6 million tourists annually. Russian athletes will enjoy state-of-the-art training facilities. Eventually, Russia will have a sports site to host domestic and international winter sports championships. Besides, Sochi hopes to boost the region’s economic development, investment appeal and prestige of the entire nation. Following the visit of the Russian delegation to Turin, during the 2006 Winter Olympics, the bid from Sochi added points to it ratings in the Olympics Bids Power Index by Around the Rings, where the city ranked third, with the first and second places going to Salzburg und PyeongChang respectively. Almaty’s bid ranked fourth. GamesBids.com puts Sochi in the second place, after Salzburg, followed by PyeongChang and Jaca.

To be more exact, Sochi contends to host the XXII Olympic Winter Games and XI Winter Paralympics for athletes with disabilities. The federal government is set to develop a mountain resort in Sochi, Viktor Kolodyazhny, mayor of Sochi, told a recent news conference. That will require spending of 320 billion rubles. By January 2007 the city will hold a bid to allocate building plots for development of key sports facilities. Project paperwork, too, is to be completed before January. 16 billion rubles have been allocated to finalize the detour road and a 3-kilometer tunnel currently under construction. The freeway is to be finalized in 2008. The federal government has earmarked 700 million rubles for construction of modern freeways. Another 3 billion rubles will be used for construction of new runways and runway extensions at Sochi Airport.

Sochi, situated on the same latitude as Nice, has a unique microclimate created by mountains and the sea, which contributes to the quality of snow. The bid committee is convinced that the rejection of Moscow’s bid to host the 2012 Olympics has not dealt any serious blow on Russia’s reputation. On the contrary, the second attempt speaks for Russia’s resolve to host the Games. Besides, Sochi’s bid enjoys wide support of the federal government.

Olympic Concept

The bid is based on the federal target-oriented plan for the development of the Sochi mountain resort till 2014. Once the project is fulfilled Sochi and its countryside will change dramatically. So far, Sochi has no Olympic sports facilities. But the government plans to develop a variety of state-of-the-art sports venues. The key venue for the 2014 Games will be Krasnaya Polyana. Sochi officials hope that after the Games the alpine sports center will attract even more skiers.

Sports facilities and corresponding public amenities are to be developed on a vast territory between Imeretinskaya Valley, the city of Sochi and Krasnaya Polyana and countryside compounds in the vicinity. In total, by the year 2014 the authorities plan to launch 11 sports venues with seats for a total of 200,000 spectators.

The main press and broadcasting center will be built in the Imeretinskaya Valley, with the Olympic Village not far off, as well as a curling venue, the Ice Palace for figure skating and a ice hockey arena. A speed skating stadium and another hockey arena are planned between the valley and Sochi. The project to develop the Central Stadium in Sochi, with 40,000 seats, is estimated at $76.1 million. In the mountainous area of the Psekhako range the authorities plan to build a ski run, a freestyle venue ($15.2 million) and a biathlon complex ($9.1 million).

A ski jump venue ($40.2 million) is planned near Grushevaya Polyana. Bobsled facilities ($71 million), two alpine ski venues ($100.6 million), a snowboard center ($15.2 million) and a cross-country ski venue ($6.1 million) are to be developed between Roza Khutor and Alpica Service. In the area between Alpica Service, Roza Khutor, Esto Sadok and Grushevaya Polyana the Olympic Village will be built.

Lining Up For Bid

Many state-controlled and privately-owned companies, which hold titles to strategic and socially important facilities, seek to be included in the bid book that is to be submitted to the IOC by the Sochi bid committee. Krasnodar Region’s maritime board has reported recently that the sea port of Sochi requires overhaul estimated to be worth 10 billion rubles. The city hall agrees that the project would enhance the city’s image. Nowadays, the port does not have enough facilities to moor more than one large passenger boat at a time. Out of the existing 15 berths only three are used for mooring large passenger ships. Another seven cater for small passenger boats on local voyages, motorboats and sports yachts. In September the plan is to be registered as an investment project, to be presented to the Kuban 2006 international economic forum scheduled to be held in Sochi on September 28 to October 1. Some say that Sochi’s bid will not succeed if the port of Sochi does not undergo an overhaul.

The Russian government and regional authorities are set to put up Sochi Airport for sale. The deal is likely to bring good returns to the buyer. Today, Sochi is on the list of Russia’s ten largest airports. In 2005, it served 1.2 million passengers. The Ministry for Economic Development has reported that the plan is to register the airport as a joint-stock company and sell it to strategic investors at a tender due in late 2006 – early 2007. The new owners are expected to expand and refurbish the airport, and finalize construction of the terminal.

Shelter for Fans

In the run-up to the Games, the city government plans construction of 29,000 hotel rooms, the mayor of Sochi Kolodyaznhnyi has reported. Those will include 5-star hotels, providing 2,000 rooms in total, 4-star hotels (7,000 rooms) and 3-star hotels (20,000 rooms). To that end the city government has tasked the UMACO company to prepare an urban planning investment concept of placement, design, construction and operation of lodging facilities in Greater Sochi. The organizers hope to raise $1 billion for the city’s hospitality sector. The coastal area of Greater Sochi, including Krasnaya Polyana, will become a venue for development of over 50 hotels.

Many hotels would be happy to offer accommodation to the guests of the 2014 Games. But to be included in the Sochi bid book, they will have to undergo a certification procedure, notes Roman Nakashidze, public relations manager at UMACO. Host cities are required to offer accommodation meeting a whole range of requirements. One of those is affordability. For example, London won the 2012 bid partly because it has a lot of inexpensive hotels, which account for 13 percent of the total number of hotel rooms, according to the British Hospitality Association.