The city of Sochi became known earlier this year as being the host of the 2014 Winter Olympics. And now the Kremlin has decided that it might be turned into a popular gaming destination.
Back in 2009, Russia took stern measures against gambling, restricting the establishment of casinos to only four areas within its territory – Yantarnaya in Kaliningrad, Altai in central Siberia, Primorye in the Far East, and Azov City in Krasnodar. Due to this decision, its southern neighbor Georgia took full advantage of the opportunity to turn itself into a popular gaming center. The fact that gambling activities are not permitted in Azerbaijan and Turkey, and are restricted in Armenia, also pointed to the potential success of the South Caucasus country.
And, indeed, this endeavor proved to be profitable, as gambling turnover really aided Georgia’s economy. As it turns out, Russia plans to establish Sochi as a famous destination and, thus, cast a shadow over its neighbor’s business.
Kremlin’s ambition, concerning the city, was considered surprising as was its decision to permit the launch of casinos in Crimea. The peninsula, that became part of Russia earlier in 2014, has gone through quite a lot and this inevitably affected its economy in a negative manner. The green light for casinos was believed to create new jobs and boost its finances.
Hosting the Olympic games brought huge expenses to Sochi and, therefore, the city really needed something to enhance its economic development and regain the money that was invested in the organization of such a large-scale event.
Vladimir Putin, President of the Russian Federation, had initially disagreed with the Sochi project. Eventually, he gave his approval for its establishment as a gambling meeting point back in July.
Russia’s ambitions will most probably challenge Georgia’s casino industry. Back in 2013, it was threatened by a local parliament’s bill that proposed for gambling to be prohibited. Yet, authorities realized that the country could only benefit from its gaming venues, so it did not pass.
Currently, the Georgian city of Batumi, located on the Black Sea coast, about 370 kilometers south from Sochi, is the most flourishing gambling city in the country. It has a total of five casinos and two more venues are expected to open doors in 2015.
Mehmet Esen, CFO of one of Batumi’s most prosperous casinos stated that he was not afraid of Russian competition. He explained that Russian citizens constitute only a small portion of all the players that visit Georgia. Most of their loyal clients arrive from Turkey, Azerbaijan, and Iran. According to him, Russians tend to travel to Macau and Monte Carlo, instead.
Mr. Esen also shared that if Russia wanted to rival Georgia, it really needed to clean up its gaming reputation. At present, gambling in the country is practically unregulated and is reportedly related to organized crime.
A few days ago, Sochi hosted a two-day conference, at which gambling industry matters were discussed. There, Mustafa Yilmaz, currently director of the world-famous casino operator Princess Casinos International, commented that he believed the city would attract some of Georgia’s Turkish and Azerbaijani customers. Citizens of Turkey can stay in Russia for 30 days without having a visa. As for Azerbaijanis, they can reside in the country for three months.
What is more, while Batumi is a desirable destination only during the summer, Sochi enjoys visitors throughout the year.
Mr. Yilmaz pointed out that he and all other investors that expressed interest in Sochi’s potential development had way too many questions and were not provided with any answers. For instance, there is no exact information on where the gambling zone is to be located, how many licenses will be issued, etc.
One thing is clear – it will take quite some time before Sochi is turned into a major gaming hub.
