The Academy of Winter Sports in Krasnoyarsk is one of the largest projects being realized in Russia in the field of sports development. The design has been already finished and approved by federal authorities. The construction has started. The only remaining problem is to find investors to build the infrastructure
Demand is High
The same principle to cover the costs of professional sportsmen at the expense of mass sport amateurs became the idea of the Krasnoyarsk Academy. The project will be certainly demanded by federations and professional athletes, as the Krasnoyarskregion has been defined by the Ministry of Sports and Tourism of Russia as a base to develop 10 of 15 Winter Olympic sports. The Academy has its potential to train biathlon, luging, ski (except super giant slalom), masters of the sled and snowboard.
Marketers are sure that the Academy will be popular among tourists and sports amateurs. Despite the fact that the region has several ski resorts, including a very successful commercially Bobrovy Log (Beaver Log) and Divnogorsk, the number of winter sports in the region is growing steadily. Sports industry market players note that over the past five years, the turnover in this segment increased by almost 2.5 times, mostly because of the growth of goods sold for winter sports. This industry was the first to recover from the recent economic crisis in 2009. Since that, it has been steadily developing.
According to Leonid Ipatov, a famous Russian skier who now heads the Moscow office of Rosengineering, the ski resorts market in Russia is currently occupied by only 30-40%. “Given our natural conditions, almost every Russian city with a population of 300,000 can build a successful ski center. As of today, only a few cities with a population of 1 million can afford such venues,” he says.
Infrastructure is the Most Expensive
However, given the existing favorable conditions and external factors, the construction of the Academy goes slower than expected, although the project started in 2008. The main reason for that is the project cost that is estimated at $400 million. The project ideologists do not consider any half measures. They want to build the Academy of biathlon and two cores – Sopka and Raduga. All presentations of the project indicate the following distribution of funds: 2010 - $400,000, 2011 - $52 million, 2012 - $108.6 million, 2013 - $125.5 million, 2014 - $61.7 million. These are the funds needed to build three basic centers – Tramplin, Lyzhny, and Freestyle. At the same time, investors perfectly know that most of investments in sports facilities are usually spent on infrastructure, including residential and entertainment real estate and logistics.
A typical “classic” winter sports resort has a simple structure: sports facilities themselves, a hotel (camping or group of chalets), public catering, engineering networks, and access roads. However, a large-scale multi-purpose project that is designed to train national teams and to host International competitions is a more complicated thing to build. It happens because the professional athletes cannot reside there permanently, so the infrastructure area of the Academy in this case is the entire city ofKrasnoyarsk, starting from the International airport and train station, and ending up with a hotel chain of at least four stars. The whole Academy project has necessary design solutions concerning extensive construction works in the city, namely the extension of Svobodny Avenue and adjacent roads, a multi-level car parking and new transport routes to bring the people to the Academy.
Pros and Cons of Construction Zones
The Academy project with its entire infrastructure has many challenges and problems. On the one hand, its location is convenient: the Western part of Krasnoyarsk has clean recreational areas next to the Siberian Federal University to the East, and a ski stadium to the North. There is a former children’s camp on the territory as well. The camp has a road connection to Stasova Street. There is a high-voltage power transmission line running through the construction zone.
These are the pros. As for the cons, the asphalt road leading to the camp is accessible only from a dirt road. Secondly, the children’s sports camp belongs to the Raduga core and is currently nothing more than ruins, so the area needs to be cleared and built up again. Finally, the power transmission line is not sufficient to meet the needs of the Academy (a lot of energy goes into the building of the Federal University), so the builders will need another transformer there. In the Sopka core with old ski jumps, the builders will have to demolish all buildings, as they do not meet modern requirements. The supporting structures are outdated as well.
Since there are no centralized engineering utilities in the area of the Academy, the project designers decided not to install any centralized heating there. Instead, they plan to develop an autonomous electric heating of the buildings. It is estimated that this plan will increase the load on the Academy electricitynetwork up to 13 MW, which is critical.
The final problem is a cableway. This is not an ordinary elevator, which brings athletes to tracks and jumps, but, according to the designers, is a large cableway that goes across the Yenisei river. Its purpose is to connect the Beaver Log fan zone with the Academy. This seems the best route for potential clients of the Academy, but the whole project looks ambitious and expensive: the length of the cable way is estimated at about 5 km.
Technology is Everything
The list of infrastructure of the Academy has a number of additional points. The ski slopes need snowmaking systems and snow compactors, ice-freezing systems and local lifts. According to specialists, construction of 1 sqm of a typical ski resort costs about $1,000. As for such centers as the Academy, this figure will certainly be higher. Here is the price list to equip the ski center: cable lifts - $3-12 million, a snowcat - $50-300 thousand, snowmaking systems - $100-150 thousand per one track, snow cannons - $20 thousand and more.
According to Vladimir Gordeichik, Development Manager of the Blagodat ski center located in Belokurikha, Altai Territory, the purchase of equipment is not expensive compared with other costs. “The first thing you need to do is electricity, communications, and roads. Any winter sports center should have convenient roads to access cars and public transport. This issue is very critical to the city transport park,” says Gordeichik. Finally, it pays to think about some commercial projects to reduce the payback period of the Academy. All ski resorts of the world typically have special sites for extreme sports - tracks for snowmobiling, dog or reindeer sledding. Another income source is bars and restaurants located on the territory of a ski resort. On the other hand, additional infrastructure normally requires 30-40% more investment.
Ten-Year Payback
If we talk about payback, we should understand that the Academy would take a long time to pay for itself. Today, even local Krasnoyarsk officials cannot tell exact dates. If we take into account comparable industry statistics on ski resorts, according to Vladimir Gordeichik, investors that built in Russia such centers initially think about payback periods of ten years and above. According to Stanislaw Tischenko Director of the Samara ski resort Krasnaya Glinka, a ski center is not the place where people come for quick money. “This theory applies to a compact, purely commercial project designed for the mass tourism and sports. A multifunction academy, designed to serve a dozen of professional winter sports will pay for itself even longer.”
Dmitry Svischev, Vice President of Russia’s Federation of Skiing and Snowboarding, believes that a minimum payback period for a ski project outside Moscow and St. Petersburg is 10-11 years. He also thinks that a public-private partnership is the key to the success. “Money is really big and long there. It is impossible to start building such projects without personal contacts with regional top officials. A ski center, in my opinion, is a symbiosis of commerce, sports and social policy. Normally, such projects involve government agencies, businesspersons, and athletes. The joint team of those basic market players can make a good and successful product,” says Dmitry Svischev.
Why Investors Should Care?
The Academy of Winter Sports in its present development stage is an ambitious and problematic project. However, serious investors engaged in a promising partnership have nothing to be afraid of. Especially given certain guarantees and advantages of the project. First and foremost, it is a friendly attitude and support of both local and federal authorities. The project of the Academy was presented to Russia’s Prime Minister Vladimir Putin at a recent Krasnoyarsk Economic Forum. The Prime Minister highly appreciated the presentation and promised to talk about it with the Minister of Sports and Tourism of Russia Vitaly Mutko. The result was fast to come: the Academy is included in the Federal Program of Financing the Construction of Sports Facilities. $7 million of the Federal budget will go to finance the project by the end of this year. In 2012, the sum will grow up to $12 million. In addition, over the next three years, the Siberian Federal University will receive $33 million from the local Krasnoyarsk budget, the major part of which will be used to finance the construction of the Academy. The general economic development is another favorable issue for investors to consider in this respect. In 2010, the Krasnoyarsk territory was recognized as the most attractive for investors in the Federal Northern District. The regional economy earned more than $8 billion, of them 53.8% were investments in fixed assets. Over 20% of foreign investment in the Siberian regions targeted Krasnoyarsk. This is 3.4 times more than in 2009. Such positive statistics affected domestic and international investment ratings of the region. According to Expert RA Russian agency, the Krasnoyarsk territory was No. 8 in Russia in 2009-2010 based on its investment potential. Standard & Poor’s International agency not so long ago assigned its ‘stable’ rating to Krasnoyarsk, confirming the long-term credit rating of ‘BB+’. The agency issued a comment in which it forecasted a further economic growth in the Krasnnoyarsk territory in 2013 based on high budget performance and low debt burden.
Who Is the First?
We can state that the Krasnoyarsk region today has favorable conditions for longterm investments. Perhaps the only thing that the Academy misses is promotion of the project internationally. The local authorities do everything they can, but the only foreign company interested in the project is the France-based Gorimpex, which manufactures equipment for ski resorts. The company is ready to build a 5-kilometer cableway across the Yenisei to the Academy. Another French company Accor, which specializes in the hospitality industry, demonstrates its desire not only to build new hotels in Krasnoyarsk, but also to co-invest in the whole project. However, this is not enough. The huge sports and tourism potential of the Krasnoyarsk region awaits strategic investors. The first of them to occupy this niche will get higher dividends in the long term.
Text: Anatoly Ageev