When the government put Kyiv’s central Dnipro Hotel on sale in February, esports entrepreneur Alexander Kokhanovskyy, 37, knew he wanted to buy it.
Kohanovskyy, with partners he’s unwilling to disclose, bought the hotel in July, using a small company not associated with him. He planned to announce the purchase at an industry event in September.
But he had to announce it earlier than that “to stop rumors” fueled by the fact that he used a shell company and maintained secrecy around it.
Kokhanovskyy says that his grand idea is to turn this historic hotel in the heart of Kyiv into the first hotel in Europe dedicated entirely to competitive video gaming, where teams or individuals play against each other for prize money in front of millions of viewers watching on- and offline.
Kokhanovskyy, dubbed as one of the most influential esport personalities by Forbes Russia, is the founder and former CEO of NaVi, a superstar esports team from Ukraine.
He says the purchase he made on July 15 is just the first step in his ambitious plan for Ukraine’s gaming industry. He says he wants to develop the whole “esports ecosystem” in Ukraine with arenas and gaming centers in major Ukrainian cities within the next five years.
“We want to make Kyiv a European mecca for esports,” he said, adding that esports could bring thousands of jobs and millions of dollars to the country through gaming tournaments, given Ukraine has good infrastructure to host such events.
But where’s the money coming from?
Speculation is rife about where Kokhanovskyy got $41 million to buy the hotel, stoke up by his refusal to disclose his partners’ names.
Kokhanovskyy was dubbed one of the most influential esports personalities of 2019 by Forbes Russia after launching the DreamTeam platform, a niche gaming platform helping professional players find teammates, improve their skills and earn money.
Working between the U.S. and Ukraine and employing 50 people in total, Kokhanovskyy’s DreamTeam raised $15 million.
A woman rides on bicycle in front of the Dnipro Hotel in the busy Kyiv center on July 16, 2020. (Volodymyr Petrov)
Kokhanovskyy said he bought the hotel from the state with other Ukrainian partners, whose names he refused to disclose before they finalize the deal with the State Property Fund, which is selling the hotel. The closing date of the deal is still unknown, he said.
A Kyiv Post source in the Ukrainian government who wasn’t authorized to talk to the press said that Ukrainian betting agency Parimatch reportedly took part in the purchase.
Kokhanovskyy didn’t deny it, but rather refused to comment.
Parimatch is a so-called “toto lottery” where the players are guessing the results of sports event, and it used to evolve in a gray legal area until gambling was legalized in Ukraine on July 14, one day before the sale of the hotel.
When betting was still indeed forbidden in Ukraine, Parimatch did not hide it was fighting for its legalization, the betting agency press service told the Kyiv Post on Sept. 4. After Ukraine’s President Volodymyr Zelensky signed the country’s Gambling Act into law on Aug. 11, Parimatch announced it was going to pursue a license.
Kokhanovskyy said he is not interested in gambling, but refused to say more about his partners.
“Once the deal is done, I will say everything about the partners and the sponsors,” he said.
Rumors also persisted that Russian money could be in the deal, with some naming Alisher Usmanov, a Russian oligarch close to the Kremlin and Russian President Vladimir Putin, as a likely investor in Kokhanovskyy’s acquisition. Kokhanovskyy denied that, despite a common business history.
In 2015, Kokhanovsky and Russia-born esports entrepreneur Anton Cherepennikov created a holding company called ESforce, uniting teams from Ukraine and Russia. Alisher Usmanov’s holding invested $ 100 million in Cherepennikov’s team and acquired NAVI’s media rights the same year, but Kokhanovsky left ESforce at the end of 2017 when he launched DreamTeam.
“We don’t have any Russian oligarchs, nor Russian money in our deal,” he told the Kyiv Post.
The deal would likely be deemed illegal if the funds were from Russia. The rules of the privatization of the Ukrainian state property ban selling it to Russian companies or companies with Russian nationals among founders.
Future of the hotel: esports training center
Kokhanovskyy says that he sees the hotel as a future training center for esports, where computer geeks can clash playing video games for a living, a global industry that topped $1 billion in 2020 and keeps growing.
Playing competitive video games has become a full-time job where esports players earn thousands of dollars per month on average, and even more in tournament cash prizes.
Esports gaming participants can receive single-game cash earnings of up to $200,000 and some high-level competitions — like Dota 2 International — have first-place winning prizes of about $10 million.
The 13,000-square-meter hotel located just a short walk from the Dnipro River will host professional esports teams and their trainers from all around the world.
Hotel rooms will be equipped with huge screens and high-end computers. The hotel will also offer small venues for esports events or tournaments with large monitors for spectators, where players can train at computers and discuss strategy before their game, like in any classic training center.
It will take at least $20 million and 12 years to return investments on the Dnipro Hotel, Kokhanovskyy said. He is currently looking for an architect to upgrade it and a hospitality company to manage the hotel.
Transforming the Dnipro Hotel into the first hotel in Europe entirely dedicated to esports will give Ukraine’s IT industry a “major advantage” compared to other countries in the region, Kokhanovskyy said.
He said having it ready to host players and their teams would encourage esports leagues to organize tournaments in Ukraine, thus bringing profits from these events to the country’s economy.
If Ukraine had more infrastructure like this, it could rent it to international tournament organizers and make a profit from the hotels and arenas.
“It will attract game developers and investors to develop the esports ecosystem in Ukraine,” he said.
However, the Ukrainian federation of esports Esport Ukraine claim they do not believe in the project.
“It’s not him buying the hotel and we don’t believe in it happening to be an esports-venue, so there is not much to comment on,” they said.
Another esports hotel already opened in July in Osaka, Japan, but only the first three floors are dedicated to training, and the rest are ordinary hotel rooms.
Asia, and especially South Korea, is currently considered the real mecca of esports, with multimillion-dollar esports arenas in Seoul, for example. The strategy game Starcraft brings in millions of viewers to South Korea, where international competitions sell out stadiums.
Kokhanvoskyy wants to do the same in Ukraine.
Number one industry?
Kokhanovskyy believes Ukraine’s skilled esports athletes could make the country proud, with competitive video games surpassing the popularity of soccer at home in Ukraine and abroad.
In soccer, clubs are collapsing, crowds are shrinking and most of Ukraine’s football infrastructure is in decay. More than 20 Ukrainian clubs have been dissolved since 2014.
Many clubs no longer have youth divisions, choking Ukraine’s domestic league to death. Shakhtar Donetsk and Dynamo Kyiv are the biggest clubs and the only ones known for their participation in Europe’s main championships.
Kokhanovskyy believes that esports and the fact that Ukrainian teams like NaVi are doing well abroad could be a game changer. In Ukraine alone, two million people follow esports, and experts predict the industry could become the world’s number one sport over the next 10 years.
“Ukraine can’t be number one in football, but we can become number one in esports,” he said, adding that he also wants to build an arena in Kyiv with up to 10,000 seats.
Apart from the Dnipro Hotel, he wants to develop 20 gaming venues in the largest cities of Ukraine with over 1 million residents by 2025. Each so-called “gaming center” should be big enough to accommodate players and allow them to train on large screens in front of a considerable audience.
He estimates the cost at over $100 million to pay for the facilities and the latest gaming equipment for the participants.
He did not expand on where the money would come from, but said game developers organize at least 300 esports tournaments per year, and the amount of money brought in by such events should make the model viable for Ukraine.
When a league organizes an event somewhere, it pays the host for the infrastructure. Esports also attracts big brands looking to capitalize on newfound opportunities. They sponsor local teams and pay the host of the event.
For example, in 2019, Nike signed a four-year deal with the League of Legends Pro League in China, bringing millions of dollars to the table for players and the tournament’s hosts.
Given the prize pool for the winner of international tournaments often reaches over a million dollars, the side revenue for the tournament’s host is considerable.
Ivan Danishevskyi, the head of the federation of esports Esports Ukraine said in an interview to Ukrainian media outlet Ain.ua that Ukraine could become an attractive destination for foreign esports teams.
“In order to train for competitions, teams gather for bootcamps – intensive training. Rents and Internet tariffs in Ukraine are lower than in other European countries, so it makes sense financially for the teams to organize bootcamps here,” he said.
Esports as service industry
But it is not enough to be part of a booming industry: Ukrainian esports also has to be internationally recognized and thus labeled as a real sport in Ukraine for the government to develop an infrastructure where players can develop their skills.
Kokhanovsky said Ukraine could develop its own esports ecosystem by informing people more about the sport and about the economic benefits it may bring to the country.
That’s why Kokhanovsky announced on Aug. 11 the creation of the Ukrainian Professional Esports Association, which aims to make Ukrainian esports an official Olympic sport.
The association will unveil its strategy later in September, but Ukrainian top officials who signed for it, including Oleh Nemchirov, minister at the Cabinet of Ministers, see esports as potential help for the country’s economy.
“Competition, infrastructure and game development can significantly replenish the country’s budget,” Nemchirov wrote on Telegram on Aug. 6.
Kokhanovskyy believes in the support of top officials who are especially interested in how the industry includes the elderly, veterans and people with disabilities.
“We need to treat esports as a service,” Kokhanovskyy said. He believes everybody can work in the industry. For instance, paralyzed people can use high-tech gadgets such as controllers placed in their mouths or voice controllers to control their game characters and move freely in virtual reality.
“It gives them freedom,” he said.
Esports gives people with disabilities a way to compete against people all over the world and can be used to help the elderly to socialize or provide rehabilitation to former soldiers, Kokhanovskyy said.
“They can work as esports coaches or team managers, for example,” he said.
Just as with professional sports teams, esports have cooks and nutritionists take who provide the right food for players. Each team has game observers working with the team and coaches to train players and develop possible strategies against other teams.
Such an industry could give new life to those ignored by other industries, Kokhanovskyy said, by giving them jobs and education about information technologies. He also said it could help them improve their mental and professional abilities, and, thus, give them the feeling of belonging somewhere while making money.
However, creating such an ecosystem will take years, he said. And buying the Dnipro Hotel was only the beginning of the adventure.
“We are building everything from scratch,” Kokhanovskyy said.
