Special Market Report Issue 19 - SOCHI - Hotel, Tourism and Leisure
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TM Hotel, Tourism and Leisure Special Market Report Issue 19 - SOCHI
Special Market Report Issue 19 - SOCHI
Aerial view of Krasnaya Polyana from Aibga Peak - to host the snow events (alpine and nordic) of the 2014 Winter Olympics
POTENTIAL ABOUNDS FOR WHAT HAS CHANGED IN THE HOTEL SCENE
SOCHI’S TOURISM INDUSTRY IN SOCHI OVER THE LAST THREE YEARS,
AND WHAT IS AHEAD OF IT?
When was the last time the Probably more changes than over the last 50 years
winter Olympics were held in combined.
a beach resort destination Save for Moscow, Sochi today has by far the largest
with a subtropical climate? concentration of new hotel rooms and global hotel
brand presence anywhere in Russia, according to
However, other than the existence of an established research compiled by Horwath HTL.
beach destination, climate and the mountains,
enormous efforts have been required to make an Sochi is the only city in Russia where you can walk
Olympic event possible in Sochi, Russia. to thousands of new hotel rooms and apartments
within 20 minutes from one another.
Not least of all, it required updating an antiquated
tourism and transport infrastructure, completing According to Horwath HTL, more than 9,000 hotel
mountain installations and creating from scratch a rooms will have opened by the start of the Olympics
hotel industry of global standards. or shortly after under either global or regional brands.
This represents a combination of franchised,
corporately operated or third-party managed hotels.
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Special Market Report Issue 19 - SOCHI
Mzymta River, Adler
This addition of 30 hotels is mind boggling when DESTINATION SOCHI
compared to the single internationally branded
property existing prior to the influx of the new hotels
Sochi is a destination with
opening over the last 24 months, but typically over the two peak travel seasons:
last two to four weeks.
summer and winter. Any
The brands include Azimut Hotels and Heliopark, resort destination envies
representing locally established chains; Golden Tulip;
Park Inn by Radisson; Radisson Blu; Mercure; Swissotel; such potential anywhere.
Marriott; Capella Hotel Group’s Solis; Tulip Inn; Hyatt
Regency; Pullman; Rixos; and eventually Courtyard by WHAT IS WIDELY REFERRED TO AS SOCHI
Marriott, JW Marriott and Extreme (the first ever sports CONSISTS OF THREE DISTINCT COMMUNITIES.
hotel under the known media brand in a ski destination
opening post-Olympics). Sochi, the established seaside city with its own concert
hall, theatre, parks, cultural attractions, cruise ship
A number of the properties are operated by Interstate terminal, marina and port facilities, is Russia’s best-
Hotels & Resorts under franchise agreements or known summer beach and health resort destination.
without brands. The diversity is compelling, yet
representing a cross section of opportunistic branding The coastal zone of Adler and Imeretinskaya Lowland
selections and solutions for a variety of reasons. is the transportation hub and the newly built sports
and entertainment center of the destination. With
the exception of the airport, the entire infrastructure
was built here during the last five years, including
fast-train connections to Sochi and the mountains;
sports facilities such as the Olympic stadium,
ice hockey and figure skating arenas; new holiday
villages; globally branded hotels; apartments; and
shopping and entertainment districts, featuring
Russia’s first theme park.
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Special Market Report Issue 19 - SOCHI
Lake Kardivach, Sochi, the Caucasus
Finally, the mountain cluster 40 kilometers (24.6 miles) THE POTENTIAL ABOUNDS
from the beaches with ski lifts, mountain installations,
and a host of newly built globally branded hotels
Russia, the CIS countries and
ranging from mid-market to luxury positioning the former republics boast
comprises the third community.
a massive and emerging
Few mountain resorts can boast a global airport with market size of 280 million
fast-train or highway connection within a 30-minute
reach of the ski lifts, the beaches and rich cultural people, the majority of which
traditions.
only speak Russian.
This Black Sea coast resort is also home to diverse
The comfort in traveling within a Russian-speaking
southern cuisines, locally grown fruits and vegetables,
environment is an advantage in this region for a long
and a mix of cultures dating back to more than 1,000
time to come. With minimal exceptions, this same
years.
market has no alternative in Russia, certainly not of this
scale, capacity and modernity when it comes to
While all of these attributes further reinforce the
beaches, skiing, mountain activities and now world-
enormous potential for tourism, the focus to date has
class sports facilities with established and further
been solely on the completion of the Olympics-related
developing air accessibility.
infrastructure and facilities.
Enormous potential exists. This potential needs to be
It is imperative to point out, however, that the
developed and coordinated to be exploited.
collection of world-class sports facilities, modern
infrastructure, brand new hotels, mountain and
conference resorts, and skiing facilities is simply not
enough for success. The challenges to make it a success
are as enormous as the potential.
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Special Market Report Issue 19 - SOCHI
Sochi, Russia
The mountain developments for the Olympics were Given the ownership structure, the likelihood of finding
in private ownership so planning and development the solution for creating the necessary platform to
started soon after winning the hosting rights for the influence the required decision making is very strong.
games. However, the coastal cluster has waited for Thus, the ability is only a matter of will to bring about
years to “find” takers. the necessary conditions for Sochi as a destination to
succeed after the games.
To incentivize investors, the state has built the
infrastructure and provided the land for development. Sochi’s winning gold is that it’s practically handing over
brand new infrastructure, and hotel capacities for a
The hotels and apartments, part of which built as tourism destination is a massive impetus for generating
vacation real estate for sale, are adjacent to the sports supply-driven demand.
facilities, the country’s only western-style theme park,
and, post-Olympics, the largest shopping center of The hotels alone, however, are lost without the support
the destination, a convention center and the brand of a city tourism organization, convention bureau,
new Formula 1 circuit that will host the first F1 event destination management companies, travel
in Russia during October. intermediaries and airlines.
The owners of the public facilities are the federal Sochi’s airport is privately owned. It has the capacity
and regional governments. The majority of hotels, to handle twice as much volume as it does today.
attractions and real estate developments are in the Airlift is a key to success for Sochi, and it would seem
ownership of the country’s largest interest groups. reasonable to assume that economics will prevail
in creating the conditions that will generate the
necessary passenger volume to earn more fees as
opposed to being an obstacle to growth.
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Special Market Report Issue 19 - SOCHI
Sochi Maritime Terminal, Russia
What are the requirements for Sochi to succeed?
• Safety is taken for granted. • The convention market already knows Sochi. With
the new facilities and the country’s largest
• Sochi is not “left behind” with the Olympic Games concentration of brand new hotel rooms and
over, and the federal and regional governments are accommodation facilities, the unique year-round
committed to the conversion of main Olympic climate will reinforce its attraction as a venue for
facilities for the long-term benefits of the large national and international events.
destination, which is completed to the level of
landscaping commensurate with any resort of this • Due to the available facilities gaming has a
calibre. significant potential subject to its authorization by
the government to further enhance year-round
• The airlines and the airport will foster tourism visitation and attract global markets even in the
development by helping to make Sochi an easy-to- event that the existing strict visa regime remains in
reach destination year round by domestic and place.
regional scheduled and charter flights.
Winning gold in the case of Sochi is not an
• The Sochi brand is properly built up and promoted achievement, but the obligation to take on the
aggressively on the success of the Olympics. responsibility of continuing to build on this new
foundation.
• An organization is established with full responsibility
for the development and promotion of tourism as an The hotel sector is there to lend a hand, but to fill
independent professional body, staffed by rooms year round requires a lot more than what exists
experienced professionals with global destination in the forms of bricks and mortar in Sochi today.
marketing and tourism management background.
www.horwathhtl.com TMSpecial Market Report Issue 19 - SOCHI
The tourism industry WRITTEN BY:
backed by vision, leadership,
professional drive and
common sense has the
ability to make a difference.
Sochi could even be referenced as a sample of tourist MARIUS GOMOLA
destination development inspired by the hosting Managing Director
of global sporting events. Horwath HTL Russia
Horwath HTL Hungary
If achieved, the successful redevelopment would email: mgomola@horwathhtl.com
not only reflect positively on the regional economy
but also become the source of pride and positive Marius has built his hospitality industry management
energy - large doses of which are required daily and consulting experience in Canada with leading
in today’s Russia. hospitality companies. He has been involved in more
than 400 projects, including a wide range of project
feasibility assessments for hotels, resorts, serviced
apartments, youth hostels, golf courses, convention
centers, spas and vacation ownership.
Marius specializes in due diligence, acquisition and
disposition strategies, valuations of single assets and
portfolios. Marius has been instrumental in completing
many “firsts” in central and eastern Europe and Russia
when it comes to branding, guaranteed management
contracts, franchise deals and lease agreements.
Recently, in addition to being one of the principal
shareholders and managing director of Horwath HTL
Hungary and Horwath HTL Russia, Marius has included
the brokerage of hotel real estate and related corporate
finance activities through HTL Capital Advisors, a new
global venture of principals of Horwath HTL.
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