Ever since I returned to London after a few years abroad I have been fascinated by the coverage of the Olympic Games taking place later this summer in the U.K., as well as developments surrounding other Olympic Games elsewhere in the world.
Being Swiss-born, I’m considerably more interested in the 2014 Winter Olympic Games in Sochi, Russia. In less than two years, on 7 February, Sochi will be in the world’s spotlight to celebrate the XXII Winter Olympic Games, and it’s never been a better to look at this gargantuan project.
Pipeline
From an hotelier’s perspective, my interest primarily has been the creation of a destination. Sochi, itself, is not a new city, holding a long-held reputation as a seaside resort of just more than 410,000 inhabitants.
As a winter destination, however, Sochi had to start from scratch.
By hosting the Olympic Games, Sochi will become a year-round destination that will cater to the discerning Russian traveler. With the expectation that Sochi will be able to accommodate more than 40,000 guests among different sites, the current pipeline of branded hotels certainly can be regarded as one of the most exciting developments in Europe.
While researching some of the projects under development, I identified 20 different brands across the four main Olympic sites, with only two local Russian hotel brands, Heliopark Hotels & Resorts and Azimut Hotels. While not all operators have been officially announced, STR Global Pipeline data shows that 3,484 rooms are currently under different stages of development in Sochi. Research also indicates that more rooms are expected to be announced with the appointment of the future hotel operators.
According to official STR Global information, approximately 70% of the construction work for the Games is complete. The airport (known locally as Adler) recently opened a 2.8 kilometer (1.7 miles) train link connecting the airport with the Sochi train station, with the objective to continue the track to Krasnaya Polyana, one of the main sites in the surrounding mountains.
The challenges
I am confident the event will be a real success and Sochi will be a revelation for many athletes and visitors. However, the destination will face a series of challenges that will need to be addressed to create the destination with long-term success:
1. Airlift
The main challenge the city faces will be how to connect Sochi to Western Europe, as well as to other important hubs in such a way that the capacity of the new hotel inventory can be filled not only during the high season but also the so-called shoulder season. Filling the room capacity of ski resorts between holidays, or when snow makes either a late arrival or early departure from the traditional skiing period, is tricky to handle.
Like most travelers, I was curious to know how I could get to Sochi. I looked at flights from Moscow as well as from other source markets. The result, as of today, shows only three major airlines service Sochi on a regular basis: Aeroflot from Moscow; Austrian Airlines from Vienna; and Turkish Airlines from Istanbul.
What can be certain for the Olympic Games in Sochi is that more airlines will operate during this period, temporarily increasing air traffic to Sochi, as well as the number of destinations that Sochi airport services. To ensure Sochi remains a year-round destination, these auxiliary airlines must maintain their presence after the Olympic Games are over.
Despite the lack of airlines servicing Sochi, airfares during the period 14-21February were still priced relatively high, between US$483 and US$614, excluding the shorter two-hour flight from Moscow, which priced itself at US$261.
Once the price aspect of getting to Sochi is overcome, the trigger point will be to convince potential visitors from Europe that the seven-hour journey east is just as fruitful as one headed toward the Rockies.
2. Visa
Once the air-link train is established, the visa procedure might become the last big hurdle for travelers planning a visit to Sochi.
I used to frequent St. Petersburg and found from experience it’s not easier for inbound tourists to navigate all the bureaucratic red tape. (For those less familiar, I’m not referring to the U.S. city in Florida but rather the so called “Venice of the North,” which is more famous for its beautiful The State Hermitage Museum and Fabergé eggs!).
The Russian government is planning a simplified visa process during the Olympic Games. However, the bigger question for hoteliers and local businesses will be what happens after the Games?
Without a simplified entry process into Russia, hoteliers’ ability to fill rooms in Sochi becomes increasingly more difficult. And as much as I would like to think that Sochi could become the “Courchevel” or “Aspen of the East,” I have doubts the new tourism market can, overnight, become a top-notch luxury destination.
3. Language
One of the most basic challenges for non-Russian travelers is the ability to communicate. For hoteliers it will mean the ability to recruit people who have the desire and passion for the hotel industry, as well as the skills to master more than one foreign language.
It’s a new concern for existing hoteliers in Sochi. At present, the market draws almost exclusively from same-language-speaking areas, said AZIMUT hotels CEO Remco Gerritsen.
“The major part of tourism in Sochi today is 30% from Moscow and the neighboring regions,” he said. “With currently limited flights from Western Europe and other parts of the world, international guests account only for 2% of tourist arrivals. One challenge we are expecting post-Olympics will be for Sochi to maintain hotel demand volume.”
Conclusion
In conclusion, I believe the Olympic Games will bring more than world-class athletes competing for gold to Sochi but also a new breed of savvy hoteliers competing for an influx of travelers in a country that is just starting building its leisure and entertainment capabilities.
David can be contacted on dgrossniklaus@str.com.
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