Anyway... I'm not sure.. I just found him randomly on my new Character at the Bannered Mare in Whiterun. Actually doing this quest as I'm typing this..
(1st time doing this quest as well, so plz don't spoil it for me...)
With the radiant AI, it's hard to tell what factors trigger the event and how much of it is purely random. Forget about it for a while and maybe it'll happen.
To make matters worse there's a few inns scattered around the countryside that aren't even in towns or cities. He could turn up in one of those as well.