YAK: Excellence in Gaming, Mexican Style

With more than 10 years of experience in Mexican wagering, the Corporación Interamericana de Entretenimiento (CIE) and its Admnistradora Mexicana del Hipódromo (AMH) division are not exactly newcomers to gaming, and the company’s roots in entertainment and status as the largest entertainment company in Latin America have given it more than a head-start in meeting the demands and expectations of discriminating casino patrons as it continues to grow its gaming operations. Rich experience in the staging, production, management and marketing of live events, theme parks and exhibitions throughout Mexico, as well as deep commercial relationships with global amusement and entertainment-related companies such as Ticketmaster, Disney, NASCAR, Cirque du Soleil, Ringling Brothers, Live Nation, Lone-Star Park and the company’s access to capital markets, give CIE/AMH a strong advantage and position for growth in the Mexican gaming market.

The Vision
According to CIE co-founder and CEO Rodrigo González Calvillo, after its founding in 1990, the company worked to hone its production and marketing skills to a high level and managed to capture the lion’s share of a huge, underserved entertainment market in Mexico. But even during that dramatic growth cycle, as the company was learning to flourish on tighter margins, it also recognized that its future growth would depend on its ability to secure key venues and expand its core competencies and abilities into other profitable businesses.

“There were no functional entertainment venues or serious venue management, supply channels for food and beverage were lacking, there were no crowd or traffic control skills, sponsorship was virtually non-existent and leisure marketing was underpowered due to a lack of efficient ticketing through broad computerized distribution,” González explained. “And so there was a possibility for creating the required infrastructure and really providing a very strong position for us. The market was ripe—it did not require any particular wisdom, it was just that it was needed in this market and somebody had to do it.”

Almost as a footnote, González added what is perhaps one of CIE’s most important business doctrines: “Entertainment is always based on key real-estate; in fact, every important venue in the world is well-located!”

The Big Move
CIE’s big move into gaming came in 1997, when the company submitted a bid to the Mexican government for the right to rebuild, revitalize and operate the historic Hipódromo de Las Americas in Mexico City. Companion to that important decision was a related opportunity to build and operate a national convention center on the property adjoining the Hipódromo at the far side of the racetrack, near the end of the prestigious Polanco neighborhood of Mexico City. CIE was eventually awarded the concession, along with a federal permit to operate 45 off-track betting centers and salons for “drawings of numbers,” aka bingo halls.

In 1999, CIE completed its ambitious $100 million remodeling project, which brought a complete restoration and upgrade of the racetrack to world-class status, including a satellite-wagering race and sports book and the company’s first Yak. The re-opening of the Hipódromo initially included an upscale, 600-seat Spanish-style bingo facility with amenities that helped AMH begin to attract year-round patrons to what had previously been a part-time venue. Since the re-opening of the track, CIE has carefully managed its live racing and now sustains thoroughbred competition 11 months of the year. So began AMH’s foray into gaming.

Between 2000 and 2004, CIE and AMH consistently, deliberately and profitably expanded their bingo halls and off-track wagering operations, and by 2004, YAK was operating more than 10,000 bingo seats in locations throughout Mexico.

According to Carlos Zamudio, AMH’s director of development, in October 2004, the Secretary of Government in Mexico (SEGOB) issued new guidelines for electronic bingo games. CIE’s management noticed the language in the proposed new regulations and approached the government with its interpretation. At the same time, CIE, with the help of a group of mathematicians, demonstrated that the bingo terminals were actually electronic drawings.

Based on preliminary responses from SEGOB and the findings of the math consultants, CIE imported 20 IGT central determination games (electronic drawing terminals) for internal testing and subsequent evaluation by Mexico’s Department of Games and Drawings to determine their compliance.

“By late April or early May 2005, following intense scrutiny by IGT and CIE’s compliance departments, it was mutually determined that IGT’s Class II gaming products conformed to Mexico’s standards and regulations and were suitable for deployment onto our gaming floors,” Zamudio recalled. “We shortly obtained the satisfactory inspection results from the government and immediately opened two locations with IGT gaming terminals, one in Santa Fe in Mexico City and the other in Valle Dorado, a Mexico City suburb.”

CIE and AMH soon realized that the new game formats were not only compatible with their operations and regulations, but that patrons became rapidly enamored with the new form of entertainment and voted their approval with enthusiastic levels of play.

With the validation of the business at hand, CIE set about the task of once again remodeling the Hipódromo to accommodate the machines and the anticipated influx of new players, as well as to include proper amenities such as parking, food and beverage service, and security. To accomplish this phase of development, the American firm JCJ Architecture, based in Hartford, Conn., was engaged and the entire concept was designed to incorporate world-class considerations not only for gaming, but also for entertainment, food service, bars and even access. “The whole project took a year, but by the time we opened our new gaming area at the Royal Yak in September 2006, we were very pleased with the outcome,” Zamudio said.

The Future
Currently, AMH has segmented its operations into three sub-brands. The primary venues are branded “Yak,” its upscale gaming salons “Royal Yak,” and the economy-minded locations “Jackpot.” When completed, the wagering operations division will have 65 gaming venues.

Under the steady hands of AMH’s management, the YAK brand has flourished, matured and profited well for the company’s shareholders. In 2008, CIE received permission to add an additional 20 locations to its portfolio of gaming salons, and presently the company is on track to open 15 of those over the next two years.

Next month, CEM will delve deeper into the operations side of CIE’s gaming business, including interviews with the company’s top executives that reveal CIE’s grounded approach to electronic bingo machines, game selection, IT management, security, compliance, finance and future development.

Chief Executive Officer

Rodrigo González Calvillo is the Chief Executive Officer of CIE Las Americas which controls and manages the Hipódromo de Las Americas, the legendary thoroughbred race track in Mexico City. In addition, through its wagering subsidiary AMH, the company has the right to open up to 65 gaming locations throughout the country under the YAK and Royal-Yak trademarks and presently operates 50 such venues. CIE Las Americas is a subsidiary of Corporación Interamericana de Entretenimiento, a publicly traded company on the Mexican stock exchange and the leading out-of-home entertainment company in Mexico.

Gonzalez is one of CIE’s co-founders and was originally responsible for the start-up of a joint venture formed with Ticketmaster in 1990. Gonzalez served as CEO of the Ticketmaster venture until 1994 at which time he became Chief Operating Officer for CIE, a position he held for nine years. Gonzalez has been a member of the CIE Board of Directors since 1995 and vice chairman since 2001.

González was born in Mexico City in 1963 and holds a degree in business administration from the University of Southern California.

AMH Business Development Director

Carlos Zamudio Jiménez has worked for AMH (the Admnistradora Mexicana del Hipódromo division of CIE) since 1989 and has concentrated on the development of the gaming business for the company. He started with the acquisition and development of the Hipódromo de Las Americas in Mexico City in 1999 and was responsible for the opening of the first Yak Bingos and Sport Books between 2000 and 2004.

Since the introduction of electronic games into the country in 2004, Zamudio has been a leader in the transformation of gaming in Mexico including the most recent change from Class II to Class III-style machines using independent random number generators.

Prior to his positions at CIE and AMH, Zamudio was a partner in CDG, a management consulting firm in Mexico specializing in privatizations, banking and telecommunications.

He holds an engineering degree from MIT (Massachusetts Institute of Technology) and a Bachelor of Science in civil engineering from Universidad Iberoamericana in Mexico City.

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