Burgeoning supply on the mountain-ski leisure market furthers the development of the hospitality business in this segment. Entire communities of small hotels and inns are popping up all around the slopes. Though domestic operators of winter resorts have a long way to go to catch up with their colleagues in neighboring Finland, vigorous growth of commercial real estate investments on the slopes is quite encouraging.

Presidential Ski-track

Supply in the sphere of mountain-ski leisure has been steadily growing in the last five years. In practically every region, from Altai and Khakassia to the Pushkin Mountains, they’ve installed ‘Alpine’ downhill tracks. In Moscow, they have managed to fashion the Moscow Alps downhill complex in the inner city. Hills were piled up from dirt dug out of the foundation pits of Moscow City. Mountain skiing largely owes its popularity to the predilections of head of state Vladimir Putin and the selection of Sochi as the site of the 2014 Winter Olympics gave a further impulse to the mountain-skiing business. Regional authorities lure investors to the “right” sport using preferential taxation schemes and other benefits. About four dozen investment projects related to the construction of new mountain-ski centers are at different stages of implementation in Russia.

The matter does not only concern the government policy. Snow-clad slopes with hoists and turnstiles proved excellent anchors for leisure areas generated around them. The hoists and points of sports equipment lease bring in only one-fifth of the total profit of investors, at the most. The remaining 70-80% the client pays out for accommodations, spa treatments and other joys of life. “When a mountain-ski resort has its own accommodations, it raises its attractiveness in the eyes of holiday-makers. This service is in high demand at remote resorts most of all. For when the time taken to travel from home to a resort is appreciable, it makes sense to spend several days off in a row at a hotel near the downhill slope,” says Andrei Dmitriev, alternate director of the consulting department at Penny Lane Realty, which is engaged in the sale and brokerage of real estate near the future Olympic facilities in Sochi and at downhill resorts in MoscowRegion.

By level of investment in mountain-skiing resorts, Moscow is ahead of St. Petersburg. It has built its next downhill slope, the Russian Mountain-Skiing School, and two more downhill tracks are slated for delivery in Losiny ostrov (Elk Island) and Novopodrezkovo by 2009. The stated amount of investment nears $70 million. Yet the plan to install the Snow Cupola in the Pavshino flood lands of Krasnogorsk District, Moscow Region, remains the boldest initiative. This analogue of the snow attraction already completed in Dubai must also function all the year round and attract abundant numbers of visitors to local shops and hotels. Yet it is premature to talk of the saturation of the Moscow suburban market with hospitality complexes at downhill resorts, opines Mr. Dmitriev. Very few resorts may boast their own hospitality infrastructure, and owners of private hotels and cottages do their best to make up for this deficiency. The yield from hotels and cottages near mountain-ski resorts is estimated by experts at 20% per annum or more.

Demand for All Amenities

Two belts of mountain-ski resorts are being formed around St. Petersburg: within 50 and 100 km from the inner city boundary. The Igora project exemplifies an effective winter leisure complex within 50 km of the city. The construction and launch of ski tracks happened practically within one year. A consortium of Russia Bank, Severstal and Sogaz invested about $55 million in the first two phases of the resort. The owners of three other large resorts located in the vicinity of the Korobitsyno community are willing to invest comparable amounts in the development of their properties, whereas just four years ago the $1-million loan obtained by the Troyard Group for the development of the Red Lake resort — organization of new downhill slopes and completion of a unique hotel, whose roof pitch serves as a trestle for a slalom track — was considered a very bold move. Now the same Troyard is willing to borrow another $20 million to build new cottages and restaurants.

“We are planning considerable expansion,” says CEO of Red Lake Victor Timakov. “The shortage of lodging places is certainly felt in wintertime. The peak of occupancy falls on New Year’s Eve and Christmas — all places are reserved by the middle of December. After the January holiday, the occupancy rate remains high for two or three months. But the main mission of the hospitality infrastructure to provide summer cash flows when the slopes lie dormant. The best months for us are July and August, when the rooms and cottages are 90% filled with holiday-makers.”

At Igora, which has been geared to well-to-do clients from the very start and competes with Red Lake, they say that demand for premium-class services (expensive guest cottages) is fully met within the confines of their project, particularly after they opened another cluster of enhanced-comfort inns and a spa complex, offering week-long treatment courses, in time for the new season. “However, our research shows that there is demand for services in the medium price range of the market. Igora plans to meet this demand too,” reported the resort’s general manager, Vladimir Chernyshov. “Not so long ago, the resort leased 815 more ha of land to construct the third phase. At the present time, we are trying to decide on the best ways to use the new territory.” “In addition to the already available economy-class hotel, we are going to build one more four-star hotel,” explains Dmitry Mandryka, development director at MC Abrosia (owner of the Igora resort). “With 100% occupancy in the wintertime and 60% in summer, we experience a dearth of vacancies on weekends. Demand for even premium-class cottages on holidays far exceeds our supply, so we’ll continue our construction activity. On the other hand, the development of a hotel chain will make us strain to fill it up in the summer. To attract vacationers, we’ve already put a carting track in place and by the next warm season we’ll certainly fashion a sand beach around our artificial lake.”

In the Heart of the Northern Mountains

Not always does the availability of good ski-tracks further hotel development. The most vivid example is the city of Kirovsk in Murmansk Region. In Soviet times, almost 30 km of downhill slopes were installed here, where the national Olympic team practiced. The most cutting-edge slope lies on Mount Lovchorr and belongs to a subsidiary of the Apatite company. It is better known as the Presidential Slope, though the president has never skied here. If he did, he would have been amazed at the misery of the surrounding infrastructure. In spite having a wealthy owner like Apatite, development of the Presidential Slope is impeded by the lack sewage and water conduits on the mount, so the company did not go beyond building several cafes on the hillside.

The entire local infrastructure of the main slopes of Kirovsk, the Iquayvenchorr Ridge, in the last 15 years, has been owned and recklessly exploited by the Colasportland company, which is under the control of a well-known local businessman. A couple of years ago, he disappeared. Apatite has tried unsuccessfully to take over the entire mountain-skiing complex and encountered problems with land handed over to Colasportland by the Sports Committee of Russia. While the court cases continue, it is unrealistic to expect any real development of tourist infrastructure there.

De facto it is the private sector that takes care of the thousands of mountain-skiers, plus several urban hotels with a rather low level of service. Number one municipal hotel Severnaya, owned by Apatite, is meant for the VIP guests of that company. Karelia and Pskov Regions have also announced mountain-skiing programs; however, regional businessmen have not braced up for building anything more ambitious in the surrounding hillside than downhill tracks and lifts. The end goal of such investments to create a base for a local children’s mountain-skiing school.

The Finns and Their Thousands

In spite of intensive development, the mountain-ski complexes in Leningrad Region cannot compete with the abundant mountain-ski resorts in neighboring Finland. “Our supply cannot stand the competition when, in Suomi, each mountain-ski complex is literally overgrown with entire communities with hotels and inns. Our construction costs are not lower than those in Finland. The Finns are greatly assisted by the state, which supports tourism and the outdoor recreational activities of its citizens. Now they are earning good money on our deficiencies,” says Mr. Timakov. Nearly 30 mountain-ski complexes, with state-of-the-art infrastructure and about 200 bedroom places per resort, now operate in Southern Finland alone – from Turku to Helsinki and Kotka. And on the way to the north the possibilities for comfortable accommodation near downhill slopes only increase. Northern Finland (the altitude of Russian Kirovsk) boasts of 22 mountain-ski tourism centers. The average capacity per resort exceeds 2500 beds there, and in

Levi, Ruka and Saariselka this indicator is 19,000, 16,000 and 11,000 beds, respectively — a good target for the domestic operators of mountain-ski centers in the Russian Northwest!