Find here the China paradigm episode 30. Learn more about Julien Delerue’s story in the meeting industry in China and find all the details and additional links below.
Full transcript below:
Matthieu David: Hello everyone. I am Matthieu David, the founder of Daxue Consulting and the China marketing podcast, China Paradigm. Today, I am with Julien Delerue. In English, it should be Julian Delerue.
Julien Delerue: I guess.
Matthieu David: You are the founder and CEO of 1000Meetings. In Chinese, it is ‘Bai Hui Tong.’ You started the business a long time ago, thirteen years ago in 2006, according to your LinkedIn information. You are providing rooms, meetings, places, and spaces for events in China as far as I understand, but you’re going to tell us more. You are based in Shanghai. You offe to connect this inventory of space in hotels or other areas with organizations or companies, which need the space to hold events. That’s what we call the MICE industry, which stands for meetings, incentives, conferences, and exhibitions if I’m correct. You have been in China for a long time. I like to know why you came to China and what happened to make you decide to start in China. But first of all, thank you very much for being with us. And could you tell us a bit about you, your company currently, what you have achieved in thirteen years, and the size of your current business?
Julien Delerue: Okay. Well, Good Morning, Matthieu. Thanks for inviting me to your podcast and that’s great to see it growing. So yeah, a little bit about myself. So, I’m Julien. I arrived in China actually in 2005. So that was roughly fourteen years ago. So, this China experience actually was very fortunate, because I was not really meant to come to China at the beginning. When I was at university, I had the opportunity. I was very fortunate to learn Chinese.
So, I picked Chinese as my second language. And at that time, actually, I have to say it was really difficult because without any environment, you don’t get to speak that much and you don’t get to see the value of it. But later on, in 2004, I came on vacation in China and I always like to say I fell in love. I didn’t fall in love with someone, but I fell in love with the country. That’s where I decided to actually move to China. What I really liked about China at that time was people, and this is still the case. Because I’m an entrepreneur in China myself. I felt like people were really dynamic and willing to start things, to embark entrepreneurship in China. This is really this environment that I really connected with and that I really love. That’s how I decided with my wife to come to Shanghai and our plan was really simple. It was to be there for at least six months, and after 14 years, we’re still there.
About the company and the business, how it started, as you said, the problem we solve is really simple. We are a bridge and we connect the supply and demand in China. In a very specific environment, we work on what you call the MICE industry, the meetings, and the corporate events industry. The problem we solve is actually a double problem. We solve the problem on the customer side. If you’re a meeting organizer, you can think about it. It’s very complicated to find meeting space in the meeting industry in China. The process, if you have a meeting to organize, is very tedious. It can take quite a few days of work of someone’s time. Let’s say that you’re looking for a venue, for example, where do you go? You can go on Ctrip to find the hotels and then you call them one by one. You submit your event brief or event requirements to ten different hotels.
Then, you need to collect the pricing from ten different hotels and gather this in a unique proposal to submit to your boss or to your organization to make a decision. This is exactly the lengthy process that we aim to shorten from three days of work or a few days of work to a very short, maybe a few hours. We really shrink this very lengthy process. Basically, customers just need to come to us. Then within a few hours, we will send back three different hotel proposals in a very structured format. That’s the problem we solve on the customer’s side or the meeting organizer’s side.
But we also serve another problem for hotels in the meeting industry in China. It’s actually very difficult to find customers. If you take an organization, a large organization, and a hotel wants to approach this organization, the big question is how to find the key meeting planner, the key decision maker in this organization, and when to contact this person because this person might not have a meeting when you call this person.
So, this is really the problem we solve, and we are somehow an online marketplace in China. We are a bridge between both worlds, the supply, and the demand. And if we talk a little bit about the business model, we charge the supply because we are on a buyer’s market. So, we charge the suppliers to be connected and to find more customers easily. And so, our role, our mission to the hotels is to bring incremental business or additional business. And our role as well for the meeting planners is to really save them a lot of time and get visibility over their consumption when it comes to meetings and events with hotels.
Matthieu David: I see. A lot of questions about the model and how you operate, because I think anyone can get the idea, but the sales strategy in China seems a bit more difficult. You may talk to a hotel, but how can they put you in priority so that within three days, when you suggest to your clients, you are sure that they are going to book your offer and not the other and that they will commit on putting you in priority? I guess you have to be a priority to them and they cannot change afterward to another organization. How did you organize it? Is it your technology? Is it your SaaS system? I saw on your profile that you have a software-as-a-service or a SaaS system. Could you tell us more about the challenges of working with the hotels in China in the meeting industry in China?
Julien Delerue: Yeah. Absolutely, that’s a very good question. And this is the problem; to be visible enough to the hotels, to get a fast response or a good price from the hotels. And so, just a little bit more about myself. So, my background is IT, so I come from the IT world. And when I was looking for an area to start a business in China, I found out that meetings and events were very manual in a way that everybody was doing the work by calling or by emails. And I felt like with my technology background, we could help this whole meeting industry in China to be more automated. Back ten years ago when I start a business in China, we were actually like the customers. So, we were picking the customers’ brief and then sending the brief to the hotels and even faxing the requirements to get a reply from the hotels. So, it was very manual and old-fashioned. And at some point, I decided to actually build a software solution to help our sales associates, whenever there is an inquiry coming from a customer, to send out this inquiry in a digital way to the hotels and then to get the hotels online directly to respond and to bid for the business. And so, it started like this and…
Matthieu David: To bid?
Julien Delerue: Yes.
Julien Delerue: Exactly.
Matthieu David: Who is bidding exactly?I am not sure I understand.
Julien Delerue: Yeah. So, the customer has a meeting request or inquiry. They want to organize a meeting in a city. Then, our system will send the meeting inquiry to the hotels with customer requirements. And then the hotels will receive that by email and be able to respond online directly by clicking on a link that redirected to a page where they can actually put their quotation for these specific events. From there, they will be literally bidding in a way that when they submit their quotation and be able to see what the pricing is from the other hotels that have quoted a rate before them, without the names of course, because we need to be compliant. But they will see their rank. This is our sales strategy in China, “Okay, first, you need to respond fast if you want to get the business.” If you respond within three days of time, you are less likely to get the business because other hotels, maybe, will respond within 15 minutes to this case and get the business done.
And the second KPI is also the efficiency. Let’s say that if you quote a rate that is 10% higher than your competitors, then, of course, you won’t be able to get the business done at the end of the day. So, we really have a role as well. We have this system that is helping us to measure, to track, and to also automate and empower our sales strategy in China. But it’s also a very good tool for us to educate the hotels, to tell them what the best sales strategy in China is. Let’s say if we talk to a hotel chain, we are able to tell them within your 100 hotels in China or even outside of China, what their response time is and how they can improve this. We have a role to actually help the hotels and the hotel chains to get more business done. Our role is not only to send leads out to the hotels or to send business to the hotels, but it’s also to help them to close more business. And this is really the name of the game for the hotels when they pay us. When they work with us, they want to get the most of it and to get a lot of insights into the meeting industry in China. And this is what we have, through a very detailed reporting, to tell the hotels how to proceed, how to be more visible, and how to get more business.
Matthieu David: I see. So, currently, how many hotels do you
have? How many places do you have?
Julien Delerue: So yeah, we started a business in China 10 years ago. And I can tell you, the meeting industry in China was a chicken and egg problem 10 years ago because when you go and see at the very beginning, they say, “Okay, that’s great, Julien. I love your idea, but we need customers.” And when we were seeing the customers, they were saying, “Yeah, we need hotels.” So, we really had hard times, from 2008 to 2010, to get a volume of them that was enough for the hotels to be interested enough in our concept. So, we really had 2-3 years that were kind of complicated at the beginning to reach that critical mass. When we started, we were working most likely with individual hotels in China. And we’ve been transitioning a lot towards hotel chains because this model really makes sense, of course at an individual property side, but when we talk about hotel chains, we have a lot of visibility for the hotel chain to see how their hotels respond and so on. So currently, as of today, we have 10 hotels chains working with us. I would say in 80% of those are international-branded hotel chains, all famous hotel chains, which represents more or less 1000 hotels. 1000Meeting, 1000 hotels.
Julien Delerue: So, this is our database for the meeting industry in China, 16,000 hotels. And then on the premium hotels that we are working with on a membership level, 1000 hotels. We also are currently developing the overseas markets, to either bring China meetings and events groups going outside of China or even to get more, if we talk about the meeting industry in Malaysia, to get Malaysian hotels. So we are expanding outside of China as of last year and are getting a lot of growth on this part at this stage.
Matthieu David: I think I missed a part of the business model. You talked about premium membership.
Julien Delerue: Yeah.
it mean that the hotel pays for specific services? I understand that it
was more like a profit-sharing model. Maybe, I am wrong.
Julien Delerue: Yeah. So, I can give you a little bit more of an explanation on this part. So, as I said, this market is mostly as a supplier market. We have a very high number of hotels on the market, and the number of hotels is growing a lot. The balance is more on the customer side, and the customers are really chased. So, our service is free of charge for customers. Whenever customers come to us, we help the customers for free to solve their issues, to find the right meeting space or to get the quotations from the hotels.
On the other side, the part we charge is actually hotels or hotel chains, to give them more visibility towards our customers and to give them more business opportunities with our sales strategy in China. So, we gather all the customers’ demand and then have this volume of business that we redistribute to the hotels. The way we work is we have a retainer fee.
Matthieu David: I see.
Julien Delerue: So, let’s say we work with a hotel chain. We have a yearly fee that we charge the hotel chain or the individual property. Then we are sending business to them. The work is evaluated based on the volume of leads that we’ve sent to the hotels and, most importantly, on the volume of actual business confirmed with the hotels. So, this is really a volume game. We really need to drive as much volume as we can from the customers. Our sales strategy in China is not to attract hotels actually but to attract quality demand from customers. And when we get that, all the rest is flowing pretty. Naturally, I would say.
Matthieu David: I see. You’re not sharing the profit then. You’re not taking like 20 or 30%. My first business was a gift box business called ‘D’Elysee.’ It was clearly a profit-sharing model. You get 30% of the service. Do you?
Julien Delerue: No, we don’t actually. So, we do, and we don’t. We have this retainer fee. It’s membership fee we call it. And this membership fee is something paid upfront to work with us. Then, we have different agreements with different hotel chains or hotels in the meeting industry in China. But to give you an idea, we charge commission fees or transaction fees we like to call those. The actual volume of business confirmed is anywhere between 5-10%. On this side, it could be considered as a profit-sharing model, but it’s not like up to 30%. If someone comes to us and the price is the same or lower than what they could get, they would go directly to the hotels. On the one hand, we solve the time problem.
And on the other end, we solve the cost-saving problem. And this cost-saving problem is actually solved by our capacity with our SaaS solution, with our software, to proceed to online bidding. When the hotels quote, they know that they need to be very attractive for the customer to win the business. And that’s the whole concept about this. If we were to charge more than 10% of the transaction fee, then definitely the end user would pay the bill for us, which wouldn’t be fair at the end of the day.
Matthieu David: I see. I understand. I feel what your sales strategy in China could be to hotels, “Don’t hire any salespeople or introduce salespeople for your events or spaces, just pay a monthly premium, a monthly membership, and pay us a little bit of commission, because the transaction goes through us or we are going to ease the process.” Is it your sales strategy in China?
Julien Delerue: No, not all, because we don’t want the hotels to see us as competitors. I think the real value we bring on the table for the hotels is definitely to present some business that they would never be able to reach.
Matthieu David: Okay.
Julien Delerue: And, of course, the hotels will always need to have salespeople with their own sales strategy in China. But what we bring to the hotel, the value added, is really, incremental business as we say. If we talk about the hotel chains, we are not helping the hotel chains to connect with customers they already know. We are helping them to find out customers that are off the radar for them and really difficult to approach. I think we are more an extension of their own sales strategy in China. It would be more a sales strategy in China to say, “You have your business, and we are bringing you more than what you have.” Because in the meeting industry in China, if you don’t sell your meeting room or your buffet lunch, it will be lost. This is a yield management part, and the things that we deliver are incremental. We definitely work hand in hand with the customers and always the hotels and help them to get connected with more customers and build their customer base.
Matthieu David: I see. Because they have a fixed cost objective. The fixed cost is quite high, but their variable cost isn’t that high basically because the people, space and the buffet are all here. They only need to fill the room. And you provide this incremental demand that helps them to make sure they have the lowest vacancy and maximum occupation.
Julien Delerue: This is the whole concept behind 1000Meetings. Yes.
Matthieu David: I see. I understand. To get a sense on how you acquire clients, I don’t feel you use online sales strategy in China. When I say clients, I mean organizations booking the hotels. So, the users of your service, what is your sales strategy in China? Is it a long process? Is it one to one? Is it word of mouth? Do you already know who you need to contact, so you don’t need an online sales strategy in China? How do you do it?
Julien Delerue: Yeah, that’s a good question as well, and I can share one thing with you. When I started a business in China 11 years ago, we were relying a lot on the online sales strategy in China, meaning that we were buying keywords and value to attract customers like Shanghai meeting space or Suzhou meeting space or Shanghai hotel. Then we were driving some traffic on the website to get meeting requests from the customer. In the beginning, it was very cheap, only a few Mao per click. So, the result was good, actually. But after a few years, a few months, the prices really went up big time, and it was very difficult for us to keep up with this. And at some point, we decided to go out and find customers just like the hotels. And I can tell you this was really the day when we started to do that. Pretty much overnight, this is where the company started to be profitable.
Matthieu David: I see.
Julien Delerue: Yeah. So, we did market research in China when we put 1RMB on one salesperson and 1RMB on Baidu or whatever it could be on in terms of online advertising in China. We definitely felt that the 1RMB on a salesperson was definitely driving much more ROI for us. And so, we terminated, somehow, the corporation and online sales strategy in China. We decided not to pursue that. And this is where we really started to pick up and grow with the business.
So, to answer your question, 100%, the sales strategy in China is going really offline. We make appointments with customers. We explain the concept to them that at a fingertip. They have 16,000 hotels that they can inquire from and get really speedy responses without overcharging. This is very attractive for them because I have to say that a customer who is organizing a meeting, usually this is not their primary job and they have a lot of things to do besides that. So, we solve a very big problem for them by bringing hotels and helping them find quotations from the hotels. I think that’s working pretty well for us—this offline sales strategy in China.
And we also have what we call the MICE showcase, the road show that we are doing twice a year in Shanghai. We invite hotels, usually 70 hotels and 150 customers to meet offline together over a one-day meeting in a nice hotel twice a year. This is really to stress out the importance of the offline sales strategy in China for us and on the offline as well for the meeting industry in China, because usually when our customers have a meeting, when they dispense, the average expense would be something like 200,000RMB up to 1 million RMB and you cannot decide online purely. The way we see technology is to help us report or to help our customers quickly find the hotels and better rates, but it will never replace the human connection. When it comes to buying 1 million RMB events, you definitely need to know and see the salespeople of the hotel.
So that’s whyback to the value proposition we have for the hotels, we don’t intend to replace them. We really need to work for hand in hand with them to get the business closed and to get the customer happy at the end of the day.
Matthieu David: I see.
Julien Delerue: Yeah. The offline sales strategy in China is important for us in a way that we have anewsletter. We have a WeChat account. It’s more to spread out the word about the new hotels opening or new promotions from the hotels, but it’s not that much an acquisition channel for our sales strategy in China. It would be much more retention channels for our existing customers to keep connected with them the full year and ensure that we get their meeting inquiries. We want them to stick to us. That’s the idea behind this.
Matthieu David: I see. Are you fine with when you do the MICE showcase, your end clients are contacting the hotel directly?
Julien Delerue: Yeah. Okay. It’s also a source of profit for us in the first place because we charge the hotels who want to join this MICE showcase. But it’s also a way sometimes the customers don’t want to go through us. They still prefer to go directly. Rather than wasting this opportunity, we still can work with those by inviting them to our showcases and having them to experience the hotels and meet with them face to face. I think, again, the problem we solve for those customers is that they are really busy. They don’t have time to seek for hotels and pressure the hotels to get a prompt quotation. I think we are still solving a very big problem that is big enough for them to stay with us rather than going directly and still inquire one by one from all the hotels.
I think this is, again, based on our technological solution of this online marketplace in China. We provide them quite a lot of comfort when it comes to saving time and getting the reporting done. And I didn’t touch too much on this topic, but on the customer side, we have an automated reporting that we can deliver to them for them to see what their consumption is with organizing meetings within the company, how much they spend, and how much savings they will generate. So, we have a whole set of KPIs that we can give back to the company. That’s also why the customers usually don’t leave us that much, because one, they get their time problem solved, and second, they get this report done, and they can justify for it.
Those are the key points where we try to be as useful as possible for the customers so that they never think about leaving us.
Matthieu David: Yeah. Actually, they would go through you, at least, to put the hotels they meet during the bidding competition and make sure they really have the best offer. They really have also thought about different places, which can definitely inspire their team when they meet or the client when they meet for the event. So, it makes sense to still go through you when they have to start a conference or organize it.
What about the process of market research in China? What are the parameters you take into account? Let’s imagine I know that I want to organize an event within 50 kilometers out of Shanghai or 100 kilometers out of Shanghai. But I’m pretty open to be in the countryside or to be in a city. What parameters do you take into account for me to conduct market research in China and discover new places and opportunities?
Julien Delerue: Yeah, it really depends on the customer brief. It can be a brief that is cost-saving driven or a brief that is ‘I want something luxury’ or ‘I want something, as you say, by the countryside, a retreat for my customers or my associates.’ It really depends on the brief. And it’s really interesting because sometimes a hotel that has a 2000m2 ballroom might not compete with this direct competitor next door but might compete with another hotel 100 kilometers away that also has this 2000m2 ballroom.
So, it really depends on the customer requirements. Of course, we can categorize this under some criteria like the ballroom-size or the number of guest rooms as well. It’s sometimes very difficult. You wouldn’t imagine if you have like 500 twin rooms. It’s very difficult to find a hotel with 500 twin rooms in China. So, this is the kind of parameters we would take into account.
But most importantly, because the kind of groups we deal with, is anywhere between is 20 people to 200 people, this is more about the experience that the group will receive. So, this is why we cannot replace our sales strategy in China by some servers or software because we really need to have the intelligence of the people and their knowledge about the market to figure out what the good hotels are for the customer. And then, the whole process of market research in China behind that is automated.
So, I can tell you a little bit more about the process of market research in China. We get the customer brief and have sales associates taking care of that. And then, we have this system, our own system. We enter the customer briefing inside the system and use the search engine, a very advanced search engine that helps us find the most appropriate hotel. We select the hotels we want within the RFP to the hotels. All the hotels receive an email with a format sharing the customer requirements.
Then they have two buttons in the email, either accept the lead or refuse it. They can refuse it in a situation where they don’t have any space to sell on that precise date, or if they already know the customer. If it is not an incremental business or if the customer already solicited them, they can say, “No, we are already fine with this customer. We don’t need your help.”
If they choose to bid with us, they accept the inquiry from us. This is when the customer will award them, and we will be able to track this as our products for the hotel.
So, it’s very clear as a process, and this is all automated. When the hotel accepts the case, it will be directly online. This is where we help the customers a lot because they go through this online form, and the hotel can also go through this form to quote the rates according to our own format. It’s not according to the hotel’s format so that when our server or our software gathers all the quotations from the hotels, we will be able to deliver that under a unique format, a very consistent format to the end user, to the customer, and the meeting organizers. The meeting organizer, very simply, will receive this online, a chart with one, two, three proposals. One, two, three options. They only need to make a decision. And sometimes, the customer will ask us to renegotiate the rate with the hotel; sometimes they go directly. That’s fine. This is where we are able to capture the rates of the hotels, and we are able to send that back to the end user.
Matthieu David: They then go through your company and then you send the money back to the hotel, or you go directly to the hotel.
Julien Delerue: Sorry. I didn’t get you.
Matthieu David: Payment. The payment.
Julien Delerue: Oh yeah. Sorry. Yeah.
Matthieu David: Does it go through your company?
Julien Delerue: Yeah. The payment will not go through our company. We don’t intend to take care of this part. This is not a problem we want to solve. So, the payment will go either directly from the company to the hotel or third-party agency of the company to the hotel. So yeah. The financial part is not something we want to touch. Our core value is on developing sales strategy in China, help hotels drive visibility and on the consulting part for the meeting planners to help them find the best options and to get the reporting done. Yeah.
Matthieu David: Okay. I see. You mentioned many times about cost saving. Is it the main reason why your clients go through your platform, or are it also to discover new places to be inspired?
Julien Delerue: I feel that the customers in the first place come to us because they have this cost-saving problem. But at the end of the day, I have to say that the most important part would be on time saving and then the fact that we help you to do the whole process of market research in China. And I think this is a very good entry point or contact point for us, the cost savings towards the customers. But definitely at the end of the day, the time saving is the most important and most critical thing. And especially when you see the labor costs are getting higher and higher, the companies have less liberty to hire people. So, we are somehow outsourcing of your company on the customers’ standpoint to find the hotels and to get, again, the reporting done. And we are an outsourced part of the sales strategy in China of the hotels if we are on the hotels’ standpoint.
Matthieu David: Okay. I feel that you have this strategic mind. You talk about it’s a buyer market and a supply market. It’s branding in China and so on. I’m sure you have ideas of where your company is going to go for its future development in the meeting industry in China. You talked about being more international. What do you see as the future of your business? We see players like Airbnb. We see players like marketplaces, which could one day be closer to your business. I don’t know if I’m correct or not. What do you see as the future?
Julien Delerue: Yeah. I think that the first 10 years of our existence were pretty much on the meeting industry in China and getting the momentum and the visibility from the hotels. I think we’ve done quite a nice achievement on this part because we’ve been able to be quite prominent in this very niche meeting industry in China. It’s still a very big market within the borders of China. I think over the last; I would say, four years, our way to acquire more and more business volume because we can always hire more salespeople to get more business volume. But we also wanted to develop other sales strategy in China to acquire more business volume from the customers and the meeting organizers. And we started to sell, as a white label product, our software solution to let the agencies or big players to use our technology and to bring their volume to our platform.
Nowadays, it’s not only us with our sales strategy in China inquiring hotels on our platform. There are also our partners. Most of them are agencies, but now we are interested in getting into large corporations who want a streamlined process when it comes to sourcing rather than sharing an excel file with all the preferred hotels. We bring them our technology to help them source the hotels in a way more efficient way. That’s what they have nowadays. This is where I see the evolution of the meeting industry in China and the future for us. So, one is technology, to sell our technology as a white label solution to penetrate the meeting industry in China and outside of China because this is actually not addressed at all at this moment. Everybody’s still very manual, so I feel that we have a very big opportunity on this side.
And the second part is definitely overseas. To get agencies, let’s say, in Thailand or Korea using our technology and inquiring hotels either in China or in Thailand or Korea or even in Paris. I think with this technology; we are really ready to scale and ramp up because it’s just a matter of acquiring new volumes of business and acquiring new meeting organizers. We’ve been transitioning from the very beginning from where we were a very manual company to acquire customers and grow bigger and bigger, to selling out this technology that we have outside of China and grow the presence in Nepal of course. But I would love to see opportunities in Europe because I definitely feel that the European event market is just like the meeting industry in China. It’s very manual and not well addressed in terms of technology. I think it should really be the twin goals.
Matthieu David: When you say certain technology, does it mean that you imagine someone in Indonesia or the Philippines to fill in their own partnership with hotels and so on or would you provide the hotel inside the technology for the event planners?
Julien Delerue: Yeah, we provide the hotels, and it is our responsibility, to provide the right contact, and the platform for those meeting planners so that whenever they get an inquiry, they just go online. They can search the hotels in a very convenient way and send out their RFP to the hotels and get a reply online.
Matthieu David: Okay. So, the technology will include the content database for you?
Julien Delerue: Absolutely. Yeah.
Matthieu David: You will not sell only the software.
Julien Delerue: Absolutely. Yeah. This is critical because nobody would use it if the content were not there. And the model would still be the same as it is today. So, on the one hand, we charge premium fees or listing fees, or you name it. Whatever. And then, we also charge technology fees to the customers using that so that we can really have a very nice ecosystem to help both sides of the world to meet together.
Matthieu David: What do you think about the companies—or is it something you have thought about doing—that are renting out places owned by anyone, by individuals, or by companies? And you can rent out space because you have a meeting room or because you have maybe a big garage or a space in your house you could rent out for a specific event. There are some companies doing that. In France, one of them is SnapEvent. I am sure you looked at their model and what they do. What’s your feedback? You couldn’t do that.
Julien Delerue: Yeah. I think that’s a pretty good model. But it’s also a very different model from what we are running because the average expense for that kind of business would be something like a couple of hundred Euros or a couple of thousand RMB. It’s just a very Airbnb concept. What the customers want is to quickly find the right place at a reasonable price and to pay directly online. This is not what we intend to do. We are working on a more complex type of events. Let’s say you are a management company and you want to do an outing in Poland. What are the cities? What are the hotels? How do you deal with that? And this is more of that kind of problem we intend to solve and want to be involved in a smaller volume.
Because when we acquire one customer, maybe, the volume would be much higher and much more interesting for a hotel. We are still very much focused on the hotel side. But then, that kind of business would be more attractive. Just like weddings, at some point, we were approached by the hotel saying, are you interested in doing weddings because this is the same thing. Weddings are just like meetings. We use the ballroom during the weekend time. But we felt that it was not the right customer base for us. We didn’t have this capacity. We had the contacts on the hotel side, but we didn’t have the business capacity to deliver and drive business volume. Sold. And so, I feel that, again, the model you’re talking about is really a great model, but we don’t feel like we have the capacity to enter into that. It will be too different from what we are doing today. So, we still want to keep the focus on this. We see a lot of growth areas in China and outside of China for that. So yeah, definitely we will stick to the current model. Yeah.
Matthieu David: Okay. Okay. Tell me about you. So, you can show that because you learn Chinese. That one is the primary reason. Then you like the people and the dynamism. It’s the business here. Um, thanks. This is one question I always have for people who have graduated from prestigious schools. You went to Telecom ParisTech. Some people who are listening to us may not know what Telecom ParisTech is, but some ministers come from Telecom ParisTech. A minister from the finance of France used to come from Telecom ParisTech, Thierry Breton, I think, and he is managing Atos now. So, it’s a very prestigious school. You went to HEC and decided to go to start a business in China, which is the most adventurous and the most difficult thing to do. It’s the least stable thing to do, especially when you have all those degrees, which can give you an entry to those big firms and another prestigious career. What happened in your mind, and why did you choose to start a business in China?
Julien Delerue: Well, I have to say it was more an opportunity thing. So, I happened to be in China, I think, at the right time, because at that time, the labor costs were relatively low. And I think if I had to do that again nowadays, it would be pretty much impossible because of the cost and the competition that might have been coming before us. I think we were very lucky and fortunate. It was not a really sound decision. I didn’t plan this for years. It was really a; I would say, the cost of opportunity. This opportunity went in front of me, and I said, yeah, this is something great. And I didn’t imagine that it would be such a long journey. I didn’t imagine that 10 years after, I would be still there and the company would meet such a success, I would say.
So, I think I’ve been very lucky, and I can say that there is a pretty clear reason for me being here. I just enjoyed my job very much. I cannot say that there is one year that is similar to the year before. So, I think that’s what is very interesting to me. I got this opportunity, and then everything came up very naturally, I have to say, with the years. And we’ve been able to grow each year compared to the year before. I cannot say that there was real planning behind this. It was much more of an opportunity. And I feel that going overseas nowadays, it’s also another opportunity and it feels like starting this business again like I started a business in China 10 years ago. This is very exciting for me being an entrepreneur in China.
And I think if you ask me, China definitely is a very good place for an entrepreneur. It’s not easy, but nowhere is really easy to start a business. And the most difficult part is to find a real problem to solve or a real issue to solve them. Then, when everything is in place, it becomes easier.
So yeah, I think the next step for us is definitely going overseas and exploring new markets outside of the meeting industry in China and, of course, keeping this China venture that is doing quite well. So yeah, to grow our presence in a broader world. Yes.
Matthieu David: You said ‘I had this opportunity,’ but is it that you got someone talking about something or you found out about this company? How did you come up with this company in the meeting industry in China? You are coming from an IT background; you went to HEC. Not necessarily hospitality. How did it come up?
Julien Delerue: Yeah. That’s a good question. So, when I arrived in China with my wife, and at that time, I was searching for entrepreneurship in China. And I had the chance to meet one of my teachers when I was in HEC, who presented me this company that was a company similar to what we were doing in France, but a paper directory. So, the way they were operating was to sell some listings to the hotels in the paper directory, like the Yellow Pages. And they were distributed across this Yellow Pages directory to a lot of meeting organizers in France. And I thought that the idea was great. And from there, we decided, yeah, let’s do that in the meeting industry in China because there was nothing like this in China.
And the idea was to have a more digital approach rather than getting this paper approach which didn’t make a lot of sense. We were in 2008. So that’s how it started. I got some funding from this company at the very beginning, because to start a foreign company, you need to come up with quite a sum of money to be ready to be losing money for the early years of starting a business in China. So yeah, that was the opportunity I had. And I thought, “Okay, how can I use my IT background to solve a problem in the meeting industry in China?” And this is where I found out we can do something. Let’s get started and let’s get out to see the hotels and the meeting organizers and see how they function. And from there, this is how we started.
And I think it was very lucky because this happened in 2008. I got the funding wired in late August. And early September, it was the financial crisis that burst out. And I guess a few weeks later, I would’ve never had the money wired, and I wouldn’t be here to talk to you today. So, I think it was fortunate as well under these aspects.
Matthieu David: You said you found the idea good, but I can’t believe that you found the idea good. I guess you made your math. You made yourmarket research in China. You did Google checks. What was your process?
Julien Delerue: Yeah, the process was first, whether the idea was a valid idea for the hotels. Will the hotels be ready to pay, to be visible on that kind of platform? Will they be interested in that type of service? So, this is something I just went to 10 hotels and just made appointments with the GMs and said, “Okay, are you interested in getting more MICE business? Are you interested?” Everybody says, “Yeah, of course. Please come back when the company is set up.”
And then on the customers, it was a little bit harder to meet with them because I think this is the beauty of our model. It’s very difficult to know, in one organization, who would be the right contact to organize a meeting.
Matthieu David: Exactly.
Julien Delerue: So, we had more market researches in China to find the right customers. But we did it, and we said, “Okay, this is a bet.” Of course, we did the math, but as you know, you can do all the business plans of the world you want, but you need to come up with a real product to be able to really see if it is a valid idea and if you can charge a customer for that. And I think it was really the difficult part of our starting as I said —the chicken and egg problem—because we didn’t have anybody or any hotel. We didn’t have any customer when we first started, and we had to get the trust of our first customers. So, I think we were pretty lucky to find our first customers in the first month. But it was then a very tough journey to drive further business volume and to tweak our business model as well because the idea we had at the beginning was just a website and if you are a hotel, you put your listing on the website, and that’s it. You finish.
And we figured out very quickly that it was not enough for the hotels. They were not interested enough just to put some marketing and wait for the customer to come. They really wanted us to help them push and find new customers in the meeting industry in China. So that’s how we came with the idea of setting sales strategy in China and be less passive towards the customer and be very aggressive towards the customers to acquire them, find them, and find what the value was that we could deliver to them. So that’s why the journey was long because we didn’t have any connection. We didn’t know much about China at the beginning and about the meeting industry in China. So, it took us some time to be visible from the right actors or the right players in the meeting industry in China.
Again, it was an opportunity by the funding that we had at the beginning and by the idea that was brought up to us by an existing player in France. But then, it was very complicated to get the whole concept started and be afloat at the same time in terms of revenue and to keep the company alive. And I think for any entrepreneur in China, and to a younger myself, if I had to give myself an advisor before starting, I think it’s to be sure that you find the right problem to solve and a problem that is big enough so that the customers will be ready to pay for it. So yeah, that was the difficult part of it.
Matthieu David: How much did you need to start? Could you share about the funding side?
Julien Delerue: Yeah. Actually, the funding was not decided by us. So, we had to present, like any foreign company, a business plan to the Ministry of Commerce. It was 2 million RMB to get this business started. The interesting thing was that, actually, we needed this 2 million RMB to cover our losses and the calculation made was very accurate. If we had only 1 million RMB, I wouldn’t have been able to make it until we were able to sustain on our own to get enough revenue or enough profit to sustain as a company. So, I think the calculation was very accurate. It ended up to be very accurate at the end of the day. Yeah.
Matthieu David: Very interesting that the market research in China can calculate accurately the product cost because we didn’t expect that. Thank you very much, Julien. It’s for nearly one hour. I heard that you have a cleaning lady in your office.
Julien Delerue: Yeah, that’s so bad.
Matthieu David: That’s fine. Thank you very much for your time. I hope you enjoyed it. It will be online in a week, I believe. And thanks for being with us that early because we started at 8:00 AM.
Julien Delerue: Yeah, thank you, Matthieu, as well. That’s the best hour to talk. This is where no emails and nothing comes up. That’s very smart of you. Thanks as well for this opportunity. It was good to reconnect with you after all those years.
Matthieu David: Yeah.
Julien Delerue: I wish you success in your future endeavors.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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