Russia can use the 1992 Barcelona Summer Olympics as a blueprint for how to transform its $50 billion investment in the Sochi 2014 Winter Olympics into a catalyst for future economic growth.
A special train with Sochi 2914 Olympic logo to deliver the Olympic flame from Vladivostok to Khabarovsk is seen off at the railway station. Photo: RIA Novosti / Ramil Sitdikov
As Sochi turns its attention to hosting the Paralympics this week after hosting a surprisingly successful Winter Olympics last month, it’s time to consider whether Russia can actually recoup its $50 billion investment in the Sochi 2014 Winter Games. It won’t be easy – in the annals of the modern Olympics, most Olympic stadiums and venues have quickly turned into white elephants. Even Lillehammer – unanimously praised as one of the best Winter Olympics ever – has failed to turn into any kind of tourism magnet for Norway. In cities like Athens, stadiums sit unused, collecting dust behind chain link fences.
However, there is one model that Sochi can hope to emulate, and that’s Barcelona. After hosting the 1992 Summer Olympics, Barcelona rocketed to global stardom as a must-see Mediterranean tourism destination. There have even been business school case studies written about Barcelona, which is now the 5th most popular tourist destination in Europe – and the 12th most popular overall in the world.
No wonder just about any city attempting to host a mega-sporting event references what economists have called the Barcelona Effect. The Olympics can act as an economic multiplier, taking all the goodwill and buzz from a relatively short two-week period, and transform it into a stimulus for even more growth. More than 20 years after hosting the Summer Olympics, Barcelona is still held up as a shining example of what to do and how to do it. When London hosted the 2012 Summer Olympics, for example, the city’s planners and organizers ripped entire pages out of the Barcelona playbook.
In many ways, the cities Barcelona and Sochi are similar. Both were regional – but not global - tourist destinations in sunny climates that had fallen on hard times. While Barcelona sits on the Mediterranean, Sochi sits on the Black Sea. Barcelona was perceived as a gritty industrial city (albeit one with some impressive architecture and a proud history), while Sochi was often portrayed as a fading Soviet-era resort badly in need of a paint job and an infusion of Western capital.
So, skeptics aside, it’s not too much of a stretch to see the transformation of Sochi proceeding along the same trajectory as that of Barcelona. Here’s what needs to be done.
1. Most importantly, Sochi needs to re-brand itself as a year-round travel destination. Sochi is already Russia’s leading summertime beach destination, but it is relatively unknown as a winter ski destination. In what used to be a sleepy ski valley (Krasnaya Polyana), there are now three world-class ski resorts, including one (Rosa Khutor) with one of the longest vertical drops in the world.
A brand-new development near the village of Esto-Sadok, known as Gorky Gorod, is a new mixed-use residential and retail complex in the mountains. Yet, heading into the Olympics, there wasn’t a coordinated marketing and branding strategy for Sochi. Western visitors complained that they had never even heard of Sochi before, and couldn’t even find it on the map.
Barcelona dealt with a similar problem was by creating a “Barcelona Growth” strategy in the aftermath of the Olympics that focused as much on business travelers as on leisure travelers.
For Spain, it was pretty much a no-brainer that the two-mile strip of beachfront that the city reclaimed from an industrial waterfront was going to bring in leisure visitors during the summer.
But the city also embarked on a prolific effort to attract business visitors. The numbers bear this out – nearly 42 percent of all visitors to Barcelona are business visitors. As a result, Barcelona now hosts more business events each year than any other city in Europe except Paris and Vienna.
Sochi needs to use the same type of logic in order to become more than just a place middle-class Russians can visit in the summertime to swim in the Black Sea. There’s a sprawling new Marriott Conference Center in the mountains, next to what had been the Mountain Media Center – that could become a four-season business conference destination.
The Bolshoi Ice Dome in the Coastal Cluster already hosts the Sochi International Investment Forum. The G8 has plans to host meetings in Sochi, presumably at one of the new 5-star hotels like the Radisson Blu Paradise Resort and Spa, where the International Olympic Family hung out during the Olympics.
At the Krasnodar Krai pavilion at Sochi’s Olympic Park, there were exhibits for all kinds of regional businesses – like Abrau-Durso, which is hoping to expand the wine tourism business for Krasnodar – that could attract visitors and investors throughout the year.
2. Sochi also needs to leverage the additional infrastructure it created for the Winter Olympics in order to create an economic multiplier effect for the Caucasus region.
There’s a high-speed train network now linking the international airport in Adler with the center of Sochi as well as the Mountain and Coastal Clusters. There’s a modernized airport, a modernized seaport, and new energy infrastructure in the mountains.
That can either be a boost for economic growth, or it can languish, unused. With an economic multiplier effect, that infrastructure leads to new jobs, which leads to more money sloshing around in the economy, which attracts more people, which leads to more jobs, and so it goes…
In the same way, Barcelona invested in new roads, highways and a modernized infrastructure as a way to catalyze growth. The plan was to stop thinking regionally and to think globally. And it’s paid off in terms of the extra tourism load as well as in 20,000 new permanent jobs.
Best of all, Barcelona has diversified away from just Spanish tourists. Only 25 percent of Barcelona’s tourists come from Spain, and only 50 percent from Europe. That means you have North Americans and South Americans flying to Barcelona as well.
Infrastructure is a tricky issue for Russia. Yes, the brand-new “Lastochka” trains were packed during the Olympics, but will they be afterwards? The key to leveraging infrastructure, of course, is to make it as easy as possible for more people to visit Sochi.
The visa regime needs to be loosened. New links need to be created between Russia and Europe. And Russia needs to keep an open mind – it’s just as easy to fly from Sochi to Istanbul as it is to Moscow, meaning that Russia may be able to reverse the net flow of visitors from Russia to Turkey.
The new modernized seaport in Sochi already connects the city with Trabzon, Turkey – why not more links to other cities along the Black Sea, including cities in Ukraine (including Crimea), Romania and Bulgaria? In a best-case scenario, there will be an economic multiplier effect in the Caucasus region extending all the way to Abkhazia (which now stands just down the beach from all the new “media hotels” Sochi built near the Coastal Cluster).
3. Finally, Sochi needs to ensure that its brand-new competition venues don’t turn into the proverbial white elephants chained behind a “Ring of Steel.” The good news is that, unlike previous Olympic host cities, Sochi has poured a lot of time and attention into the post-Olympic use for each of these venues. You can go to Sochi2014.com and check out all the uses for venues in both the Mountain and Coastal Clusters.
The way that Barcelona addressed this potential problem of abandoned venues was by enlisting the support of the Spanish authorities to create a revitalized sports industry in Spain. It transferred all the positive momentum from Spanish athletes competing for medals at the Barcelona Games into building powerhouse sports programs in Spain.
There are now world-class Spaniard soccer (football), basketball, cycling and tennis stars. Walk down the street of any major city in the world, and you’ll probably see someone wearing an FC Barcelona jersey. With a revitalized sports industry, Spain ensured that the new arenas and venues in Barcelona would be used by the next generation of athletes.
Sochi also needs to take steps to transform the impressive performance of Russian athletes in Sochi into a boom for the Russian sports industry overall. The Iceberg Skating Palace may end up staying in Sochi after all, becoming a hub for future Russian teenage ice-skating stars.
There’s a new Formula 1 course being created in the Coastal Cluster, with plans to host the first-ever Russian Grand Prix in October. There are plans afoot to host a KHL hockey team in Sochi. There’s a new International Olympic University in the center of Sochi, training the next generation of sport industry MBAs. And, best of all, Sochi is hosting the FIFA World Cup in 2018, meaning that the city could benefit from the national pride of hosting another mega-sporting event in just a few years.
A lot needs to go right, of course, if Sochi will be able to capture the Barcelona Effect and prove all the skeptics wrong. The relationship between the Russian government and private investors (i.e. the Oligarchs) is unsettled at best. But imagine the possibilities. The Black Sea could emerge as a new hot spot for European travelers, much like destinations such as Croatia have emerged in recent years.
Maybe Russia will start to engage European business and leisure travelers and convince them to come to Sochi. Twenty years from now, when other cities are looking to host the Winter Olympics in far-flung locations outside of Europe, they might actually turn to Russia for advice on how to capture the Sochi Effect.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.