1

Quantitative research of FDI in the tourism industry of the Russian Black Sea

Coast.

If to visit the official website of the Rosstat, it is only possible to track regional

spending on tourism in the period between 1990 and 2003 years. The direct federal

investments in the touristic sphere of the Kransodar region were only 0,6% of the

total spending. However, a lot of changes happened to the touristic industry in

Russia since that period. A particularly important event that boosted touristic

activities in 2004 and aroused the interest of foreign investors was the

announcement of the fact that the Olympic Games in 2014 will take place in Sochi.

This event has drastically changed the investment potential of the city and, of

course, the potential of the entire Krasnodar region, which is located in the territory

of Russian Black Sea Coast. The international investment forum that is regularly held

in Sochi had more participants than ever in its history. Moreover, the upcoming

forum, which will be held on September 20, cannot accommodate all the potential

participants. International investors mostly direct their investment flows in the JSC

“Krasnaya Poliana”. In fact, the place of the future location of the Olympic village is

currently supervised by the joint venture of this company and the United States

Company WPHG.

The place accumulated in itself foreign direct investments from such famous

international hotel franchises as Hilton, Hyatt, Park Inn, Marriot International,

Swissotel and many others. A lot of companies plan to invest in the city. The Italian

company Todini Costruzioni Generali plans to invest $882,4 million in the

construction of hotels and shopping centers in the Sochi territory. The transport

industry of the city is also enhanced using the foreign direct investments from the

Volkswagen company.

Thanks to the upcoming Olympic games the entire Krasnodar’s region

touristic industry is being enhanced to meet the needs of the international tourists.

International hotels emerge in Krasnodar and Gelendzhik, federal investments are

directed to create aqua parks, recreational facilities, improve the existing transport

infrastructure to meet the needs of recreational and business tourism.

During the past three years, the amount of foreign direct investments in the

economy of Russian Federation increased continuously. In the period from 2009 to

2011, the amount of foreign direct investments increased from $36,500 million to

2

$52,878 million, which is equal to the increase in 44,9%. 1 Russian Black Sea Coast,

which is also often referred to as Krasnodar region received a substantial amount of

the foreign direct investments. In the period from 2009 to 2012 the region received

377012,7, 492732,9, 544750,0, and 588330,0 million of Russian Rubles

accordingly.2 This means that the absolute growth of the foreign direct investments

in the region was 211317,3 million of Russian Rubles in 2012, compared to 2009. If

to use the relative indicator, the amount of foreign direct investments in the region

increased in 56,05% compared to 2009. The amount of foreign direct investments

per capita increased as well. In the period from 2009 to 2011, this balance sheet

item had a value of 39390, 45550, 42760, and 44590 Rubles correspondingly.

The factor that significantly contributes to the growth of touristic sector of the

Krasnodar region’s economy is the development of small and medium enterprises. In

fact, the investment flows in such enterprises ensure that region’s economy is

developing, in contrast to the growth of large companies that may be explained by

the growth of their subsidiaries in some other regions. In Krasnodar region, the

growth temps of foreign direct investments into the small and medium enterprises

during the past three years were 107,6%, 110,1%, 112,6% correspondingly.

Therefore, the relative growth of foreign direct investments in 2012 compared to

2009 was 10,5%.

It is important to not underestimate the importance of the involvement of local

population in the touristic activities. There is a strong trend of increase in the number

of employed citizens of the Krasnodar region, who have obtained their jobs thanks to

the foreign direct investments. In the period from 2009 to 2012, 104,5%, 105,1%,

and 105,8% of people obtained their jobs correspondingly, which means that the

relative growth was 1,3% compared to 2009.

Generally, foreign direct investments flow into the processing and

manufacturing industries of the Krasnodar region. The foreign direct investments that

flow into tourism are reflected in the balance of payments as “other investments”.

Though other investments also involve profit received from the trading activities and

some manufacturing activities, tourism is the main part of this balance sheet item,

especially if to refer to such tourism-intensive region as the Krasnodar region.

1 Cp. Balance of Payments (2012), online. 2 Cp. The report of results for 2010 and the main development directions in 2011-2012 (2012), online.

3

Russian Federation’s balance of payments shows that the amount of “other

investments” activities is gradually decreasing over the last few years. In the period

between 2009 and 2011, this balance of payments item had values of $-19044, -

$12823, and $-42438 million dollars. However, this negative trend did not reflect on

the state of things in the Krasnodar region. In 2012, the amount of other foreign

investments activities in the region increased by 4,2 times and was equal to $428

million.3 Most of these investments (61%) flowed in the transport industry, which is

vital for the successful development of the tourist industry. However, a lot of funds

were invested in the development of the hotel industry as well. This may be

explained by the upcoming Olympic Games in Sochi, in 2014. In 2011, the region

also received a lot of foreign direct investments in the transport industry. They mostly

flowed from Netherlands, Sweden and Cyprus. Besides the direct investments, large

amount of equity investment activities took place. However, most of the investments

received from such activities were associated with tax evasion and money

laundering and flew from Cyprus, which is notorious by its simplified tax regime.

Such a negative trend has bad impact on the development of tourism in the

Krasnodar region.

Based on the data above, it is possible to conclude that Russian Black Sea

Coast region has a healthy investment climate, backed up by the solid legislative

framework. Many factors contribute to such growth, but some of the most important

are Krasnodar’s focus on agro-industrial sector, on its natural resources, and, of

course, on its tourism.

One of the most prominent places that are known by the tourists all over CIS

and even European countries is Sochi. Being an attractive investment opportunity,

Sochi establishes international investment forums, on which regional authorities

discuss investment opportunities with foreign companies. The forum attracts much

attention: for example, in 2010 it was attended by 569 foreign participants4 and, in

2011 by 548.5 Sochi international investment forums raise the foreign investors’

awareness about the investment opportunities that are offered by the Krasnodar

region. Moreover, some of the investors actually sign agreements within the

framework of the forum. In 2010, 376 agreements for the total amount of RUR 768

3 “The foreign companies invested in the Krasnodar region $0,5 billion.” (2012), online. 4 “Results of IX International Investment Forum Sochi-2010.” (2010), online. 5 “Results of the Anniversary X International Investment Forum Sochi 2011.” (2011), online.

4

billion were signed, and, in 2011 the estimated value of the signed agreement was

457,1 billion of Russian Rubles. One of the most important agreements, that are also

important to deliver high-quality catering services in the tourist industry, was signed

at the Sochi International Investment forum 2004. It was on that forum that the Swiss

company Nestle signed an agreement, which cost was more than 7 billion rubles, to

establish a manufacturing plant in Kuban region. At the moment, Nestle is one of the

largest direct investors in the economy of Krasnodar region. 6

Despite the fact that Russian Federation is not very involved into the franchise

model of the company development, a lot of companies started to establish their

subsidiaries based on this mechanism, because of the upcoming event of the

Olympic Games in Sochi. In Sochi, such franchise has been established with the

hotel Solnechnyi Luch. It was partially acquired by the transnational company Hilton.

The franchise agreement was signed between the Hilton management and the

management of the company InvestGroup LLC. The newly built hotel has 11 floors, a

bar, a restaurant and a SPA zone. The hotel also has 16 separate bungalows on its

territory. The direct investments associated with this project were equal to 30 million

of Russian Rubles. The international company Hyatt is also planning to invest in

hotel industry of Sochi. Hyatt hotel will open in the fourth quarter of 2012; the

estimated investment spend on the construction of the facility is equal to RUR 7,2

billion.

Hilton group also invested $160 million 7 in restructuring the existing hotel in

Gelendzhik into one of the hotels of the Hilton chain, but the investment was not

successful. Hilton management concluded that the hotel did not meet the high

standards of the Hilton hotel network and denied the facility in the right to use its

brand.

One more hotel in the Krasnodar region that currently is a subject of foreign

direct investments is Garden Inn in Krasnodar. Garden Inn hotel is also a part of

Hilton group and, in case of Krasnodar, was a subject to the RUR 1,5 billion

investments. The payback period of the project is estimated to be 10 years and the

overall hotel area is equal to 12300 square meters.

6 “Agreements at the Sochi Forum: Nestle Kuban is one of Russia's biggest coffee producers.” (2012), online. 7 “Hilton terminated the contract with the Gelendzhik hotel.” (2011), online.

5

Despite the healthy investment climate in the entire Krasnodar region, Sochi

receives special attention due to the Olympic Games that will be held here in 2014.

On March 8th, there will be a grand opening of the Park Inn hotel, which is a part of

Radisson group. The amount of foreign direct investments in the hotel is roughly

equal to $20 million.

The international hotel operator Marriot International has also directed its

investments in the economy of Sochi. The estimated value of investment is RUR 2,5

billion. The hotel will be opened in 2013, its overall area will be 48000 square

meters, and it will have 345 rooms in the medium price range.

The boom in the foreign direct investment activity in Sochi is naturally caused

by the Olympic Games that will take place in the city in 2014. Many international

companies open their hotels in the city including Hilton, Hyatt, Park inn, Marriot

International, Swissotel, and Capella. The overall flow of direct investments is

assessed in RUR 40 billions.8 Swissotel is expected to cost about RUR 8 billion to

the foreign investors, while Capella will cost RUR 5 billion. (See Table 13) The rest

of the costs are associated with the infrastructure development and other services

provided by the international companies.

Table 13. Foreign direct investments in Sochi hotel industry in 2012.

8 “Marriott, Swissotel and Capella will open luxury hotels in Sochi.”

6

The main flow of the foreign direct investments in the hotel industry of Sochi is

directed into the JSC “Krasnaya Poliana” and supervised by the American company

WPHG. This place will become the Olympic media center and should provide visitors

with the substantial level of comfort. If to assess the overall investment trend for

three years, it is possible to see that Sochi made a great leap forward, thanks to the

JSC “Krasnaya Poliana”, which also increased the investment attractiveness of the

Krasnodar region. (See Table 14)

Table 14. Foreign direct investments in the Krasnodar region.

The overall state of the tourism industry in Krasnodar in 2012 can be

described as follows:

• In 2012, the number of the hotels in the region increased to 1813 with

241200 beds, as compared to 1612 organizations and 226000 beds in

2011.

• The flow of the tourists increased in 11%.

• The number of services provided by the tourist-related organizations

increased to RUR 7,7 billion, which is 23,2% more than in the previous

year.

• The number of services provided by health resorts increased to RUR

16,1 billion, which is 12,1% higher than in the previous year.

7

• The number of the services provided by the touristic agencies

decreased to RUR 87,5 million, which is 52,8% lower than in the

previous year. 9

The increase of the touristic activities in 2011 was significant, but it was, of

course, affected not only by the investments in the hotel industry. The important

aspect of tourism is communications and transport infrastructure, which has also

improved recently compared to the previous years. Recently, Volkswagen group

provided Sochi with 44 minivans “Transporter Kombi.” The agreement, signed in

2010, between the organizational committee of Sochi Olympic Games and

Volkswagen, also implies that the company will provide Sochi with 57 more buses to

serve the Olympic guests. The significant amount of foreign direct investments was

also directed into the development of Krasnodar airport. The region also received the

substantial amount of the federal direct investments to build toll highways on its

territory. The overall amount of the investment was equal to 7,8 billion of Russian

Rubles.10 This is more than in 2009 and 2010, when Krasnodar region received only

RUR 5 billion and RUR 5,9 billion accordingly. However, due to the Olympic games

in Sochi, the federal program called “Modernization of the unified system of air

traffic” was already implemented in 2009. Since then, the amount of federal

investments in the transport industry of the region increased.

The project of building an airport in “Armavir” was proposed in 2010 and is

currently being implemented. The overall cost of the project is RUR 500 million, and

it is expected to pay off in 5 years. The city of Armavir has currently the Military Air

Force Academy, on the base of which it is possible to implement the project. The

project may greatly increase the flexibility of passenger air transportation and

increase tourism attractiveness of the region.

During the period from 1990 to 2009, the passenger turnover that used air

transport in the Krasnodar region has significantly decreased. (See Table 15.) The

slight increase in passenger air traffic can only be seen in the period between 2004

and 2009. The situation can only be remedied by the ongoing reconstruction of Sochi

airport and the construction of Armavir airport.

9 “About the socio-economic situation in the Krasnodar region in the first half of 2012.” (2012), online. 10 “Krasnodar region department of transport.” (2012), online.

8

Table 15. The trend of passenger air traffic in the Krasnodar region.

One of the other investment projects that are currently being implemented to

facilitate the access of international tourists to the Russian Black Sea Coast is

reconstruction of the seaport in Anapa. The project implies reconstruction of the sea

terminal, building a five star hotel, a cinema, a bowling center and a restaurant. The

new sea terminal will also include a separate parking. Passenger piers will be

enlarged and enhanced to better suit the needs of the tourists. The overall

investment in the project is estimated to be RUR 2459,7 million, and it is expected to

pay off in no more than 8 years.

One more considerable investment project is the improvement of Sochi sea

terminal for it to fit the needs of international passenger transportations. The sea

terminal will also be updated to handle cruise traffic. The infrastructure of the sea

terminal will be organized so, that it could accept international tourists, help them to

accommodate themselves in luxury hotels and have rest. The estimated cost of the

project is RUR 4600 million.

The little cities in the Krasnodar region also receive direct federal investments

to improve their transport infrastructure. For example, Primorsko-Ahtarsk received

RUR 90,66 million to build a bus terminal. In this way, the suitable transport

infrastructure is created to help the tourists reach their destinations as soon as

possible.

As a part of the federal direct investments program, the high-speed rail route

is being built between Sochi and Krasnodar. The trains that run on this route will be

of a high comfort, and the new wagons will significantly increase the level of service.

Every wagon will be equipped with the system of air conditioning; the armchairs will

have displays embedded in their backrests. The wagons will also be equipped with

9

the bio-toilets and the modern systems of video surveillance. The cost of the project

is RUR 1237 million, and it is expected to pay off in no more than 7 years. However,

railway industry demands it, as shown by Table 16, as it indicates the clear negative

trend of passenger turnover in the period from 2007 to 2009.

Table 16. Rail transport passenger turnover in the Krasnodar region.

\

In 2011, the overall transport industry of the Krasnodar region improved

significantly. The cost of the transport services provided was RUR 121,3 billion, the

overall passenger turnover was 473,7 million of people. The following graph shows

the distribution of funds in the transport industry of the Krasnodar region. (See Table

16)

One more important aspect that is necessary for the successful growth of the

tourism industry is public catering industry. The industry of public catering, which is

represented by the local cafes and restaurants in the Krasnodar region, grows

steadily. At the moment, there are 1478 restaurants and cafes in Krasnodar, which

brings the city profit of RUR 12,6 billion. The growth rate of this sector is also

favorable and is estimated as 107% compared to the same indicator in 2010. The

reason of the successful catering business development in Krasnodar is that, after

the prohibition of gambling, the city had a lot of free space for the small and medium

enterprises. The local cafes and restaurants occupied this space.

10

Krasnodar region catering industry is mostly a subject to private investments.

Some of the most popular restaurants, such as “Kitano Chelentano” and “Holostyak”,

are the subjects to the private investments from the Russian organization “Horeka

Invest Group.” However, some of the cafes and restaurants are, of course, subjects

of the foreign direct investments.

Table 16. Direct investment projects in the transport industry of the Krasnodar

region.

The well-known international company McDonald’s has established its

subsidiary in Sochi in 2004. The restaurant has 400 seats for the potential clients,

and was a subject to the investment of more than $1,4 million. There is also a

McDonald’s restaurant in Krasnodar, which was opened in 2006. The overall

investments in the opening of this restaurant were more that $1 million.

The Krasnodar region has the subsidiaries of such famous franchises as

Pizza Hut, Burger King, Friday’s, Wag Mamma, Beer’s Tube, Federico Fellini. All of

these restaurant chains provide the same level of service as they do in other

countries. Due to their globalized strategies, their menu is also very similar in all the

countries they operate. An interesting fact is, however, that in Sochi’s subsidiary of

McDonald’s the prices are ridiculously high. However, this does not seem to affect

the competitiveness of the restaurant.

To summarize the foreign direct investments insight in the catering industry, it

is necessary to underline that the percentage of the international franchises in the

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Krasnodar region is very limited. The rough estimate of such franchises is 3-5%

depending on the city. This may be explained by the customers, loyal to the local

cafes and restaurants that can provide a high level of service.

While Sochi is the main subject for the foreign and federal investments, there

are some other cities in the Krasnodar region that deserve investors’ attention.

Tuapse city was found 150 years ago to protect Russia from the sea attacks. The

city became a popular resort facility in Soviet Union and does not lose its popularity

even nowadays. Tuapse is a middle class resort, but it will naturally become

something more with the start of Sochi Olympic Games in 2014. Meanwhile, some of

the federal investments in the city were the construction of sanatorium “Gamma” with

RUR 217 million of the direct investments, reconstruction of the indoor pool in

“Zelenyi Gay” sanatorium, the cost of which was more than RUR 93 million, building

of the ice palace near the city. The building of the palace cost the investors RUR 254

million. Some other subjects of the federal direct investments were aqua park

“Orbita”, outdoor pool and reconstruction of the medical facility in the Nebug village,

that is located near the city. The total amount of the investments was RUR 612

million. Two more aqua parks were the subjects of federal direct investments. They

are currently located in the villages Jubga and Olginka, near the Tuapse city. The

overall cost of construction was RUR 155 million. The federal direct investments also

flew in the reconstruction of the Tuapse embankment.

Despite the fact that Tuapse received a certain amount of the federal direct

investments, it certainly deserves more. The city combines in itself industrial and

touristic potential and has one of the sea terminals that never freeze. Some of the

possible investment projects are further reconstruction of the Tuapse embankment,

building of the recreational facility “Gora Semiglavaya”, which is located in the highly

comfortable area of the city. The name of the area is supposed to be “Yuzhnaya

Zvezda”. The city may also benefit from the increase in provision of the public

catering services. The current investments projects of the cafes and restaurants

include building of the café “Kamennyi Cvetok”, building of the café in the Juba area,

building of the café in the Olginka area. However, it will be very advantageous for the

city to receive direct investment in its transport industry. This way it can become an

interchange station for the tourist that will come to visit Sochi Olympic games in

2014, but for some reason, will not be able to go directly to Sochi. The enhanced

transport network will also benefit the overall wellbeing of the region.

12

The city of Gelendgzik also received a substantial amount of federal direct

investments to improve its touristic potential. Over the last few years such aqua

parks as “Zolotaya Buhta”, “Delphin”, and “Begemot” were constructed. The city has

a mountain park named “Safari”, which combines in itself a nature conversation area

and a touristic attraction. The city’s seafront was also enhanced with the beautiful

fountains all along the alleys. The amount of funds invested in the enhancement of

the seafront is RUR 273 million.

The city has also enhanced its transport potential with the help of federal

direct investments. The construction of Gelendzhik airport is currently in progress,

but it already operates. The first air flight was conducted on December 25th, 2008. At

the moment, the airport can handle a passenger turnover of up to 900000

passengers a year. The overall federal investments were more than RUR 8 billion.

The airport has a class IV according to the international classifications and provides

the city budget with RUR 135 million per year.

Gelendzhik hosted MIRIM-2011 event, which was also a source of the foreign

direct investments for the city that means that Gelendzhik is a place of attraction for

the international real estate investors. The event brought the city RUR 8 billion. JSC

“Kubanskaya Marka” has become a private investor for the city and increased its

potential to accommodate tourists from all over the world. JSC “OBD-Rielt” has also

become a private investor and agreed to invest into the construction of highly

comfortable areas in the city. As a result of Sochi International Investment forum in

2005, the city received a direct investment into the construction of apartment

complex “3-Progres” that is currently completed and populated. The complex

includes 44 cottages that are located at no more than 100 meters from the beach.

The city also received direct foreign investments from the “Hermitage

Construction & Management Group” that invested RUR 9 billion into the construction

of international hotels. The federal investments in the hotel sector were equal to

RUR 1264 million, which included the construction of the “Kedrovaya Roshcha”

pension, the enhancement of the “Primorie” hotel, and the “Nadezhda” hotel. The

“Nadezhda” hotel was equipped by the congress hall, which will contribute to the

development of the business tourism in the city. Federal direct investments were

also directed to the microdistrict “Yuzhnyi”. RUR 120 million were allocated to

enhance the area and make it highly comfortable for the international tourists.

13

However, it is necessary to underline that the city may have benefited if some of the

federal direct investments were allocated into the development of rail transport. A

sustainable rail connection of Gelendzhik with Sochi can facilitate the flow of tourists

between these two important touristic centers.

Another city that received a significant amount of federal direct investments is

Anapa. Anapa is the city that was attractive for the local tourists for many years, but

today it becomes something more, because of the forthcoming event of the Olympic

games in Sochi 2014. The city received a significant amount of investments to

improve its microdistrict “Vysokiy Bereg.” The micro district is situated around the

ancient monument, which is St. Vladimir temple. This temple is the center, around

which the enhancement of the micro district takes place. “Vysokiy Bereg” is a very

advantageous place of accommodation for international tourists. It is located near

the sea and consists of the resort area and park area. The resort area is currently

enhanced by the paved embankments near the sea and reconstructed areas, in

which it is possible to get access to the sea. The transport infrastructure of the micro

district is also enhanced significantly. The total cost of the project is RUR 24000

million. This money is supposed to be used to enhance the area of 80 hectares. The

microdistrict “Vysokiy Bereg” is mostly enhanced by the sanatorium facilities and

tourist objects, such as surfing center and the improved building of the hotel

“Chernomorskiy”. Moreover, the upper embankment of the micro district is being

extended to fit the needs of the enhanced transport infrastructure. The breakwater is

being constructed as well; its overall length will be 100 meters. The overall costs of

the investment is RUR 2080 million and €60 million of foreign direct investments.

The project is expected to pay off in no more than 10 years.

Reconstruction of the Anapa sea terminal is also a subject of federal direct

investments. The terminal is basically transformed into the entertainment area for

international tourists. The cultural, manufacturing and business facilities will be

unified by the common aesthetic elements to create a recognized image of Anapa’s

sea gates. The project implies construction of a modern hotel in the terminal territory,

reconstruction of the terminal itself, construction of a modern cinema, a bowling

center and a restaurant. The overall amount of the direct investments is RUR 2130

million, and the money is expected to pay off in 7,8 years.

Another place of the touristic attraction that is being implemented in Anapa

with the help of federal direct investments is the touristic complex “Etnographic

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Village”, the aim of which is to show the development process of Anapa since the

period of Ancient Greece. The project is aimed at recreating the cultural heritage of

the local habitats, including architecture, national cuisine, arts and customs. The

complex will be divided into such facilities as a hotel, a café, several chapels, 5

thematic objects, a trade center, a pond, and the stables. The estimate cost of the

project is RUR 105 million, and it is expected that the object will pay off in no more

than 6 years.

Another subject of federal direct investments in Anapa is construction of the

thematic amusement park. The park will involve 25 thematic rides based on the

myths and legends about ancient nations that once inhabited Kuban, a hotel, a few

restaurants, a skating rink, and a 3D cinema. The overall cost of construction is RUR

3500 million, and the project is expected to pay off in no more than in 6 years.

Thanks to the federal direct investments, the recreational area will also be created in

the “Yuzhniy” area and “Kavkaz” area of Anapa, as well as in the territory of

sanatorium “Desantnik.” The overall cost of the enhancement is RUR 1700,1 million,

and it is expected that these investments will pay off in no more than 6 years.

Thanks to the sources of foreign direct investments, it becomes possible to

build a Disneyland in the territory of Anapa. The territory of the park will be

subdivided into a few thematic zones oriented on both children and adults. The

overall cost of the project is €189 million. A certain portion of the federal direct

investments was used to also create a golf center in Anapa. The golf center includes

not only the golf field, but also a hotel, a few tennis courts, café’s, restaurants and an

equestrian club. The overall cost of the project was €135 million, and it is expected to

pay off in no more than 7 years.

The federal direct investments that flew in the region over the last three year

were also used to create an aqua park in the territory of Anapa. Its cost was €5

million and it is expected to pay off in no more than 3 years. The federal investments

were also used to create an ethnic village “Za okolicey”. The village is intended to

familiarize foreign tourists with the peculiarities of Russian culture. It has a well, a

chapel, a place for the different ethnic competitions, a bathhouse, and so forth. The

estimated cost of the project is €5,09 million, and it is expected that the project will

pay off in no more than 7 years. The federal direct investments in Anapa also

allowed building the SPA complex, which is currently in the process of construction.

The complex will have a sauna, a barbershop, and a beauty salon. The overall

15

amount of investments is RUR 8 million and it is expected that the object will pay off

in no more than 5 years.

To conclude, it is necessary to underline that, of course, the flow of foreign

direct investments and federal direct investments in Gelendzhik, Anapa, and Tuapse

is less then in Sochi. This situation seems natural, as it is Sochi that will temporarily

become an Olympic capital of Russia. Domestic and federal investors do their best

to transform the city for it to meet the European standards of quality. The

international hotel franchises also see an opportunity of expanding their business

into the city to get their profits from the tourists that are loyal to their brands all

around the world. The works that are being carried out in Sochi truly help the city to

become a proud capital of Olympic games. However, it is very important for the city

to maintain the European standards even after Olympic games. Over the last

decade, the city experienced a major fall in touristic activity, which is gradually

restoring now. This is why, the main task of Sochi’s government should become

maintenance of the European quality of service in all touristic activities. Otherwise,

Sochi may face the fate of Gelendzhik, where Hilton group had to close their

franchise due to the low quality of service. Wise touristic policy may make Sochi a

competitive resort all the year round and, even in winter, European tourists will visit

the city to go skiing.

Despite the fact that Sochi has become the most important subject of the

foreign and federal investment in the Krasnodar region, the other big cities in it also

deserve investors’ attention. The importance of investment in these cities is

manifested in the fact that they can become an interchange point during the Olympic

Games in 2014 and will provide a sustainable basis for the development of tourism in

the future. The federal direct investments should primarily flow in the transport

industry of these cities. This way, it is possible to ensure that tourists will be able to

travel easily around the region and find places that are most suitable for them. The

fact that most of the tourists earn different profits may make some locations more

suitable for them, and the developed transport infrastructure will help them to find

such locations. For example, middle class prefers to rest in Gelendzhik, Anapa, and

Tuapse, while affluent population always chooses Sochi because of the superior

level of service in the city. The inequalities in people’s wealth make them to go to the

different restaurants, sleep in the different hotels and sunbathe on the different

16

beaches. The paramount aim of the tourism at the Russian Black Sea Coast is to

make the touristic activities comfortable for all people regardless of their earnings.

17

Sources:

1) http://www.gks.ru/free_doc/new_site/vnesh-t/pl-bl.xls

2) http://www.investkuban.ru/dep_admref3.html

3) http://fedpress.ru/news/econom/news_business/inostrannye-kompanii-investirovali-v-

krasnodarskii-krai-polmilliarda-dollarov

4) http://www.forumkuban.com/arxiv/2011/results.php.htm

5) http://www.forumkuban.com/results.php

6) http://www.investkuban.ru/en/newslist/item-719.html

7) http://www.rbcdaily.ru/2011/03/17/market/562949979876295

8) http://www.rbcdaily.ru/2011/09/16/market/562949981491992

9) http://expert.ru/south/2012/21/mentalitet-byot-poryadok/

10) http://tskk.ru