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Gold Medal Gamble

In size and terrain variety, the Olympic venues in Krasnaya Polyana are comparable to France’s Les Trois Vallées. But will they survive after the torch is extinguished?

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Paul Mathews arrived in the Caucasus on the private jet of a Russian plutocrat and for a week was chauffeured around the mountains in an armored Mercedes with an escort of several dozen police cars and a bodyguard named Sacha who looked like a stand-in for Arnold Schwarzenegger. There were state dinners and vodka toasts and a pig roast in the forest. “It was like an acid trip,” says Mathews, a veteran mountain-resort designer, recalling the exploratory trip he took in 2000 to scout ski areas in southern Russia.

Mathews, the president of Ecosign—a Canadian company that has designed over 380 mountain resorts in 36 countries, including Whistler Blackcomb, Canyons Resort in Park City, Zermatt, and Courchevel—had been invited by the Russian government to evaluate the potential for an international mountain resort complex in the north Caucasus. Wealthy Russians were spending an estimated $2 billion each year at resorts in the Balkans and the European Alps; surely they could be enticed to spend some of it in their own country.

The Caucasus range, which spans Russia and Georgia between the Black and Caspian Seas, lies on approximately the same latitude as the Colorado Rockies. The tallest peak, Mount Elbrus, at 18,510 feet, is higher than any in Europe. Mathews spied the most promising terrain in the Mzymta River Valley above Sochi, a popular, mild-weathered resort city on the Black Sea coast where Russians had been escaping their brutal winters since Czarist times. A 40-minute drive into the mountains, the sleepy town of Krasnaya Polyana was tucked along the river beneath steep, craggy peaks that loom 5,800 vertical feet overhead, with faces that bear large, glaciated bowls and massive avalanche paths. To Mathews, the place resembled France’s sprawling Les Trois Vallées, with huge potential for skiing. There seemed an almost perfect ratio of beginner, intermediate, and expert terrain and the capacity for 90,000 skiers a day. One family-owned ski area had been operating in the valley—Alpika Service, which had a few rickety doubles—as well as two heli-skiing outfits, one French and one Russian.

Mathews recommended a plan for seven ski areas that could be linked, along with three village centers, golf courses, and nordic facilities. The project moved forward, beginning with Gazprom Mountain Resort, bankrolled by the world’s largest natural-gas company, which is majority-owned by the Russian state. Farthest upriver would be Rosa Khutor, the crown jewel of the valley, which Vladimir Potanin, one of Russia’s richest men, stepped forward to develop.

Roger McCarthy, former co-president of Vail Resorts’ Mountain Division, was brought in during the winter of 2007 to help launch Rosa Khutor. McCarthy had done rebuilds of a few ski resorts, including the turnaround of Quebec’s Mont Tremblant. The prospect of getting in on the ground floor attracted him. “I had three major questions,” McCarthy says. “Are the mountains real? Is there enough snow? And do they have enough money to get this thing done this right?”

Right away, driving into Krasnaya Polyana, McCarthy satisfied his first two concerns. He was flown in on an Mi-8 military transport helicopter (“the thing was like a flying school bus”) to the future upper base plateau of Rosa Khutor, where he recalls stepping out into snow that reached his armpits. The lake effect off the Black Sea can send Krasnaya Polyana huge winter dumps (or rain at lower elevations). Snow would not be an issue.

And with Vladimir Potanin, an avid skier with a net worth of $14.3 billion, neither would money. McCarthy recalls his first meeting with the magnate, who controls Interros, a conglomerate with large stakes in mining, at a fortified office building in Moscow. Once he cleared the heavily guarded parking lot, McCarthy had to pass through an airport-style X-ray scanner at the entrance, followed by a revolving Plexiglas tube in the lobby, where an “NFL lineman,” who spoke into a device on his wrist, led McCarthy up an elevator and two flights of stairs to a meeting room. “As a guy in the ski industry,” McCarthy recalls, “this was certainly nothing I’d experienced before.”

In 2005, when Moscow lost its bid for the 2012 Summer Olympics to London, Russia’s Minister of Sport asked Mathews to explore whether Krasnaya Polyana could possibly host a Winter Games. Ecosign had designed the master plans for Nakiska, the site of the 1988 Calgary Winter Olympics, and Snowbasin, for the 2002 Salt Lake downhill and super-G events. Mathews hired Bernhard Russi, the Swiss ski-racing legend and a leading authority on downhill course design, to scope out Rosa Khutor.

To McCarthy, an Olympic bid for a resort that had never hosted a race—or run a ski lift—seemed like “a fairly aggressive dream” at the time. “They were bidding for the Olympics, and they didn’t have anyone who really knew anything about the ski business,” he says. But the terrain checked out, and this was Russia: Money reigned, rules could be bent, and the president loved to ski. Mathews, alongside President Putin, pitched Sochi to the International Olympic Committee.

This was the moment when plans for Krasnaya Polyana morphed from “grandiose,” as Mathews describes his original designs, into something “super turbo grandiose”—a showcase or, depending on your point of view, a boondoggle. Since the IOC awarded the Games to Sochi, the Mzymta River Valley has seen the largest concentration of ski-industry investment in the world. An $8 billion high-speed rail line, bored into the mountainside and elevated above the river in some parts on massive stanchions, is capable of whisking 800 people from Sochi to Rosa Khutor in under half an hour. Rosa Khutor possesses the world’s most robust snowmaking system, which is said to have cost $100 million. (Ecosign’s original plans for Rosa Khutor—including lifts, trails, and snowmaking, but not buildings—called for $165 million, which, Mathews says, “was already a stupid number.” Recent news reports suggest that figure is now closer to $650 million. And with buildings, the number creeps to $2.2 billion.)

Enter the valley today on a new two-lane highway, and you pass a string of colossal hotels and condominiums designed to keep the Olympics running smoothly for a fortnight. What happens after that, though, is anybody’s guess. “What’s being built now is for a 16-day wonder, but I’m not aware of any economics that were done for the after-Olympics usage,” says Mathews.

Gazprom Mountain Resort, across the valley, bought Alpika Service for a reported $80 million and upgraded and expanded the former mom-and-pop area. Gazprom is a mostly beginner mountain with an outsize base area boasting high-end retail stores. (Gazprom will host the nordic events for this winter’s Games.) Russia’s state-run lender OAO Sberbank, whose annual revenues exceed those of Bulgaria, has a controlling interest in Gornaya Karusel (“Mountain Carousel”), the fourth ski area in the valley, which is essentially a string of gondolas rising from a gargantuan hotel and apartment complex. It has some terrific high-alpine advanced terrain, but it is so limited that, in Mathews’s estimation, it might not be a particularly viable ski area.

That’s not the case with Rosa Khutor, which has a charming, if antiseptic, base area designed to vaguely resemble an Alpine village. Facades of seven-story international hotels, all of matching architecture and with chic ground-floor restaurants, line both sides of the river, which has a pleasant esplanade and lamplit pedestrian bridges. The focal point of the base area is a clock tower fronted by a brick plaza. There’s an indoor skating rink a short walk away, a rental shop, and retail stores. Two gondolas leave the lower base in the valley, at 1,800 feet, for the upper base area, at 3,800 feet; one connects Rosa Khutor to Alpika Service. Much of the resort’s current 500 skiable acres (plans call for more to be added) is off-piste, above treeline, and avalanche-prone, with spectacular views of the North Caucasus. A full-service Spanish restaurant sits atop the summit, at 7,600 feet.

One has to wonder how the resorts in the Krasnaya Polyana valley will be able to fill all those beds after 2014. “It’s an extraordinary experiment, with billions of dollars, to see if Russians will ski in their own country,” says McCarthy. (His involvement in Rosa Khutor ended after eight months.) “If [Rosa Khutor] was in North America, it would be a kickass resort—there’s no two ways about it. But you’re dealing with absolute neophytes. If you buy a Ferrari, you need to know how to drive and maintain it. I’ve worked on a few [resort] bankruptcies since 2008, and I’ve come up with a theory, the Rule of Three: It needs to be within three hours of a million people. It just costs so much, and you need that driving market. You can be a destination resort, but it’s really tough to get people in by planes.”

Sochi, however, may prove the exception. It’s already a popular summer destination, and it’s only two hours by plane away from Moscow, which has a population of 12 million and one of the world’s greatest numbers of billionaires, who typically ski abroad. Paul Mathews believes Krasnaya Polyana is capable of drawing two million annual visitors. “It’s going to be a real resort center for Russia. There’s no question.” (Ecosign worked on Rosa Khutor through 2011.)

The task of creating the draw falls in part to the French outfit Compagnie des Alpes. CDA, which manages some of the most famous resorts in Europe, including until recently Verbier and Courmayeur, has a 25-year agreement with Potanin to manage Rosa Khutor (the ski operations, not hotels or concessions). I met the resort’s general manager, Jean-Marc Farini, at the swanky bar off the lobby of the Park Inn by Radisson.

Farini concedes that his company is entering uncertain territory. “We are creating a new offering in Russia that has not existed before,” he says. “Nowhere in Russia can you find international hotels and good restaurants close to a chairlift. We have 90 kilometers of slopes that provide excellent snow from November to the beginning of May. Our resort is saturated during the Russian holidays, and with 1,500 meters of vertical, we definitely match the best European resorts. Those are the facts. What will be the answer of the market? We can never be 100 percent sure. But 50 years ago, many people didn’t believe there could be any visitors to La Plagne,” which CDA owns and which is one of France’s most popular ski areas. “It now receives three million skiers a year. Russia is a brisk market, one of the few in the world with increasing numbers of skiers and snowboarders. We believe Rosa Khutor will create a new [domestic] market.”

What Rosa Khutor will not be is a straight import of a French ski resort. “We cannot just make a copy. We have to adapt to the Russian culture and Russian expectations,” Farini says. But many of Compagnie des Alpes’ efforts so far, beyond making Rosa Khutor ready for the Olympics, have been to introduce Western standards of safety and guest experience—in other words, to make the place less Russian. “We want to change something in the feeling of the guests who are coming to Rosa Khutor,” Farini says. “Our goal is to have friendly people at guest services. But in Russia that hasn’t been done before. You still have this Soviet legacy [where] people don’t care.”

“Have you been on the road in Russia and seen how people are driving?” adds his colleague, Jean-Louis Tuaillon, who oversees the resort’s day-to-day operations. “They are skiing the same way. The typical Russian experience is wild skiing.”

“Basically [Russians] do not follow the rules,” Farini goes on. “They don’t heed the boundary or the warning signs you put on the slopes. For the cash registers, I wanted to adopt a single line, so you go up to the first one that’s available. But that just doesn’t work in Russia! So it forces us to adapt our own way of organizing a ski resort. This will never look like an American or European ski resort—but it will be safe.” Farini pauses thoughtfully. “We’re building in five years what took 50 years in France.” 

The Putin Olympics»

Given his propensity for carefully cultivating his macho image—riding horses bare-chested and all—perhaps it’s no surprise that Vladimir Putin is a hardcore ski enthusiast.

“He’s passionate about skiing,” says Sasha Rearick, head coach of the U.S. men’s team, who met Putin in 2008 during the Moscow Invitational slalom event. The Russian president courted the American men, hosting them for a (heavily armed ) dinner and a sneak peak of Rosa Khutor, the 2014 Olympic ski-racing venue.

Apparently Putin can also arc a turn. Rearick says, “For a politician, he’s a great skier.” —Kelley McMillan