Sochi after the Olympic Games: Development Driver in the South of Russia

March 18, 2014

Investment in infrastructure development for the Olympic Games in Sochi totalled RUR 1.5 trn (approx. USD 45 bln). This investment became the basis for further development in Sochi and the entire Krasnodar Territory in the following areas:
  • Tourism and entertainment
  • Small business
  • Creating new jobs
  • Increasing tax revenue payments to the local budget
  • Improved quality of the city environment
1. Tourism and hospitality development
The tourism infrastructure quality dramatically improved during the preparation for the Olympic Games in Sochi:
  • 14 Olympic facilities were built which could be used for tourism purposes and for holding corporate events and conferences during the whole year
  • Increased accommodation capacity – 46 hotels with 27,000 suites were constructed or renovated
  • The throughput capacity of Sochi International Airport increased 2.4 fold
The improvements will enable:
  • Increasing the tourist flow to Sochi by 10 - 15 % per year. The increase may reach 450,000 - 500,000 persons per year in 2015-2016
  • Increasing the purchase of goods and services to RUR 13.5-16.5 bln (USD 422 mln - 515 mln) per year (13 - 15 % sale of goods and services in Sochi in 2012)
  • Increasing the Gross Regional Product of the Krasnodar Territory by RUR 40 - 50 bln (USD 1.25 bln - 1.5 bln) per year (by 4-5 % compared to the current level)
  • Actively develop event tourism (Formula 1 Grand Prix in Sochi, international competitions, world-class performances, festivals, etc.)
2. Small business development
The creation of infrastructure, development of tourism and hospitality will result in a higher demand for the following services provided by small businesses:
  • Organising rentals and entertainment for tourists
  • Public catering services
  • Organising guided tours
  • Retail in clothes and footwear
  • Production and sale of souvenirs

New ‘Olympic’ districts – Imereti Lowland and Krasnaya Polyana – may become small business development centres. Around 10,000 new small businesses may be established in Sochi by 2015.

3. Creating new jobs
The tourism and hospitality development and the maintenance of ‘Olympic heritage’ facilities will become drivers for creating new jobs after the Olympic Games in Sochi.
An increase in the tourist flow by 10 persons per year results in the creation of one additional job. Therefore, given the expected increase in the tourist flow, the number of transit passengers and business trips, we can expect to create 200,000 jobs in the nearest future and additional 90,000-100,000 jobs by 2017.

4. Increasing tax revenue payments to the local budget
  • The creation of 200,000 new jobs will result in an increase of revenues from the personal income tax to the city and regional budget by at least RUR 7.2 bln (USD 225 mln) within a year
  • Additional revenues to the regional budget from the income tax will be approximately RUR 1.6 trn (USD 50 bln)
  • Payments to the local budget from property taxes will be RUR 889 mln (USD 27.7 mln) per year
  • Additional non-tax revenues from land lease in the mountain and coastal clusters will be RUR 267.9 mln (USD 8.4 mln)
The tax proceeds received significantly exceed costs related to the maintenance of infrastructure facilities (RUR 2 bln per year, or USD 62.5 mln). The surplus may be invested in improving infrastructure and developing a new resort district of European class in the Olympic cluster.

5. Improved quality of the city environment
The quality of the city environment in Sochi after the Olympic Games will be improved due to:
  • Solution of transport problems
          - 260 km of motor roads were built (including an alternate route to Sochi’s main thoroughfare, Kurortny Avenue), extending the                 capacity of roads 1.8-2.5-fold, increasing the average traffic speed in the city by 25 %, and reducing the number of traffic                         accidents by 15-20 %
          - A network of parking areas was created, more than 30 new railway platforms were commissioned,and ‘Olympic’ buses will be                 assigned to the city to serve as public transport
  • Better environmental conditions
         - The ‘zero waste’ principle was implemented: newly built and renovated treatment facilities will be capable of processing 100 %                 of city waste with a higher effluent treatment ratio
         - The problem of waste landfills with exhausted capacity was solved due to the construction of a waste sorting plant.
         - Specially protected natural areas are planned to be increased by 20,000 hectares
  • Creating an available environment for disabled persons – Sochi will become the first city in Russia completely accessible to disabled persons
  • Developing education and healthcare – new hospitals, schools, and higher educational institutions are being planned for construction.
Further development of Sochi, based on the infrastructure created for the Games, depends on the well-coordinated actions of the authorities and private businesses using the built-up potential in an efficient manner, continuing the course towards renovation and improvement of the city environment and applying private-public partnership tools (on the model of Sidney and Barcelona).