12 October 2006
Sochi: Business and Pleasure
In the summer Sochi's warm beaches are lined with swimming-suit-clad tourists, palm trees, and kiosks selling smoothies, kvas, and matrioshka dolls. That's right, it's in Russia. As Jack Medzorian recounts, Sochi's infrastructure is straining to keep up with its mostly-Russian tourists - but it's still a great place to visit and business there is going well.
Sochi: Business and Pleasure
I have been visiting Sochi, Russia, on the Black Sea, at least annually since 1992. I have seen this beautiful Russian resort (some say the only sun spot left in Russia and the best kept secret in Russia!) develop into a bustling vacation spot for the new Russian wealthy class, most of whom come all the way from the Russian Far East, where there is oil wealth, very cold winters, and no sunny beaches.
Further exasperating the problem of accommodating this new wave of tourists, which has already strained Sochi's infrastructure, is the large influx of refugees from wars in the Caucuses in the 1990's including the Abkhaz/Georgian and the Nagorno Karabakh wars, which have increased the permanent population several-fold.
Sochi authorities are doing their best to keep up with this phenomenal growth but the infrastructure of the city is strained, especially in July and August. The roads are jammed with tourists' cars (incidentally, mostly late model luxury cars) and gridlock is a common experience. The airport has had no improvements in the past 20 years, with the cranes still motionless, hovering over the "new airport construction in progress" as they were when I first saw them in 1992. On the other hand, hotel construction is booming and exquisite "dachas" (summer homes) are continuing to be built.
However, the impact of the infrastructure problem can be seen in business. 1993 was the year when I forged a Russian-American joint venture to operate a luxury hotel/spa in Sochi, the Neva International, and westernize it to get it ready for the influx of foreign tourists that we envisioned would inundate Sochi and pay higher than prevailing prices - or, so our business plan predicted. Instead, the new airport has not become a reality and the roadways have not changed, and lower-paying Russian tourists have flocked in, not foreigners. The only improvements I have seen recently were on the road to Krasna-Polyana (which heads north), which has been vastly improved and is now lined with expensive year-round resorts which cater to mostly winter tourists and skiers. Getting ready for the Winter Olympics? If you haven't already seen this scenic area, you should; it has really improved!
There are also some odd protocols in the Russian way of doing business. My recent trip to Sochi in late August of this year was to renegotiate the terms of a lease with the Russian partner. First of all, the rules for land ownership in Russia are complex and hard for most westerners to understand. By the third day of negotiations, when we still had hanging issues, the Russian side decided we should write a letter of intent and at least memorialize what we had agreed to and meet later to resolve remaining issues, rather than try to continue and hammer them out. A typical Eastern approach to resolving a problem: walk away and hope for the best. Anyway, it was a good chance for R&R and the weather cooperated.
In conclusion, try Sochi sometime, especially the spas, you will like it! However, beware of the traffic jams, it helps to know at least a little Russian, and don’t under-budget yourself, as US dollars are increasingly worth less in rubles.
Jack Medzorian is Chairman of the Board of Neva Enterprises, Inc. and JV Partner of Neva International, a Russian-US Joint Venture, registered in St. Petersburg, Russia.
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