A sub-tropical Black Sea town bursting with lush greenery, Sochi is Russia’s best-known beach resort. It is the country’s southernmost city and one of the few places across its vast expanses where snow almost never falls. The palm-lined streets are fringed with handsome sanatoriums and ugly, modern hotels. Out of season, in winter, the city is bereft of visitors. So when it was chosen to bid for the 2014 Olympic Winter Games – and selected as the winner by the International Olympic Committee last year – more than a few eyebrows were raised.

The organisers point to the 2,000m mountains, just a short drive from the coast, and promise “the most compact Winter Olympics ever”. There are two main clusters for the Games – the ice venues at Adler, 30km from Sochi city centre, and the mountain venues that surround Krasnaya Polyana, a village that is a 40-minute drive away.

The plans are impressive, most notably the stadium where the opening and closing ceremonies will be held – a glass-encased horseshoe on the shore of the Black Sea that tapers to open at one end, revealing a view of the mountains.

But almost all of the Olympic venues will have to be built from scratch. The expanded airport, to be completed by October 2008, is so far the only site where construction has started. The mountains at Krasnaya Polyana are currently home to two small resorts with a relatively limited number of pistes, reached by open, hair-raising, Soviet-era ski-lifts.

Most of the mountain events will take place at the Rosa Khutor site, where construction has just started. “When it’s ­finished, Russians will no longer have to go to the Alps for good skiing,” says Alexander Belokobylsky, director of the project’s construction. (The Russians give up Gstaad? Unlikely.) For now, the multiple black runs exist only in the models and diagrams that litter his office; the slopes are expected to open in 2011.

Nobody in Sochi likes to talk about budgets but the rumours in Moscow are that the original estimate of €8.5bn might have to be tripled. Around €2.5bn will be spent just to compensate the people who will be compelled to leave their houses to make way for Olympic venues. But most of the projects are ­described as “Olympic legacy” projects, which will benefit the region long after the event. And in Russia’s current economic boom, finding the cash to build the venues is probably the least of the city’s problems.

The most obvious challenge is infrastructure. Sochi currently has no proper sewage system, suffers from appalling urban planning and is plagued by traffic jams. There are several major transport projects planned, including an overground light-rail system to link the ice and mountain venues. But the road ­between Adler and the centre of Sochi is at times just a single lane in each direction, and permanent traffic jams into Sochi mean that the 30km journey usually takes an hour or more.

The other glaring deficit is in hospitality staff. The organisers estimate that around one million people will descend on Sochi during the Olympics and the service and restaurant culture in the city is not an enjoyable experience.

“It’s difficult to find people who want to work and they need a lot of training in how to serve right and cook well,” says Marcel Simonneau, a portly Niçois who runs the kitchen at Atmosphere, Krasnaya Polyana’s only decent restaurant. After a career working in the kitchens of Monaco and Paris, he came to Russia – first Moscow, then Sochi and Krasnaya Polyana for three years respectively. “It’s going to take a lot of work,” he says over what is probably southern Russia’s finest tarte tatin. “But in Russia, everything is difficult but nothing is impossible.”

With the Olympics in mind, one local university has set up a training centre to teach the basics of the restaurant business. It has more than 800 students. In a kitchen and mock-up restaurant on a leafy Adler side street, young would-be chefs learn how to cook, be polite to customers (rare in Russia), and run a kitchen. “We want to bring people up who are capable of catering for all the guests we will have,” says one of the institute’s teachers, Marina Belitskaya. However, a quick glance at the basic, stodgy Russian food the young gourmets have produced suggests that there’s a lot of work ahead if they are going to cater to the demands of the thousands of athletes from across the world who will descend on Sochi in 2014. It’s at this point you have to ask yourself again how Sochi ever won the Winter Olympics bid.

The Olympic prospect has already driven a property boom in the city and beyond. “Until recently, properties in Sochi were bought by people over 40,” says Elena Galchuk, head of the Sochi office of Blackwood, an estate agent and consultancy. The city has functioned as a scruffy Russian version of Miami Beach, catering for retirees from Siberian oil towns. “Young people don’t come here – they would prefer to go abroad, where there’s more of a party scene,” she says. Russia’s elite also steer clear of the area, preferring to ski in the Alps and holiday in the French Riviera or further afield.

That could change, with Russia’s young and rich keen to get in on the Sochi boom. Land prices leapt by over 20 per cent when the IOC’s decision was announced, with the price per square metre in the centre of town going up to around €6,000, up from €2,000 in 2005.

Many thousands of hotel rooms will have to be built – most of the current ­accommodation consists of low-quality family-run rooms. There are several elite apartment projects, perhaps the most ambitious being the Dubai-style artificial Federation Island, built in the shape of Russia, providing luxury accommodation and recreation for 25,000 people.

“Now Russians will have a place to go that’s as good as the French Riviera, without leaving their own country,” says Erick van Egeraat, the Dutch architect behind the island’s masterplan. That seems a little deluded. Indeed, the traffic jams, stray dogs and cheap, shoddy buildings that characterise Sochi today make it hard to imagine the transformation that will have to take place over the next six years.

“It looks beautiful, doesn’t it?” asks Efim Bitenev, the deputy director of the Organising Committee based in Sochi, speeding through slides of stadiums and arenas on his laptop. “The only thing left now is to build it all.”

Sochi was up against Salzburg and Pyeongchang, South Korea, in the vote to host the 2014 Games. When the International Olympic Committee met in Guatemala last July, the Korean city was firm favourite, but Sochi beat it by 51 to 47 votes.

In Russia, there was no doubting who was responsible for Sochi’s win. “This is a personal victory for Vladimir Putin,” said the speaker of Russia’s upper house of parliament. Putin has an official residence in Sochi, frequently skis at Krasnaya Polyana, and he travelled to the IOC meeting in July. The state-controlled media went into hyperbolic overdrive over the IOC’s decision, saying that it proved once and for all that Russia is a major world power. Putin has said that the victory was one of the biggest achievements of his eight-year presidency.

Now that the Olympics have been positioned as a Putin-inspired “national project”, Kremlin-friendly oligarchs have pledged vast sums to development. The Rosa Khutor skiing site is funded by Vladimir Potanin’s Interros, and a hotel complex opened in February is financed by energy giant Gazprom.

Sochi residents are divided on what the Games will bring. Many share Putin’s pride over the decision, but there are also those who feel the Olympics will do nothing for ordinary residents and are an excuse for Moscow bureaucrats to build themselves lavish coastal residences with government funds.