Space tourism businesses, like any start-up, are sensitive to delays in sales growth. Delays impact their ability to achieve a sustainable cash flow and necessitates ongoing fundraising and investment. Moreover, delays in establishing market sales leadership or delays in servicing customer demand in a timely manner leaves the door open for competitors to enter and service the demand.
Sales growth for space tourism will not be urgent concerns for some businesses such as SpaceX, where space tourism is currently a side business. SpaceX is generating strong sales from their core business which is commercial space operations (i.e. launching satellites, delivering and returning cargo and astronauts to ISS). For other businesses where space tourism is their primary source of sales, sales growth will be much more problematic.
It is not clear if Blue Origin will feel urgent concerns since Jeff Bezos is selling $1 billion of Amazon shares every year to fund Blue Origin. However, Jeff Bezos has said that his goal is to make Blue Origin profitable.
Virgin Galactic is feeling some urgency. On January 13, 2022 they announced intentions to raise $425 million in debt. When could Virgin Galactic run out of money? A recently published article examined that question:
- As of September 2021, Virgin Galactic had sufficient cash to support three years of operations, i.e. to 2024.
- Analysts believe that Virgin Galactic will break even in four years of operations, i.e. 2025.
- Virgin Galactic will need to raise additional capital before breaking even.
- Virgin Galactic’s future success in raising capital will be heavily dependent upon their sales outlook and their market capitalization. It will certainly result in shareholders being further diluted in the future.
Sales growth is dependent upon: increasing customer demand, ability to service customer demand, and competition. These three critical dependencies will be explored below, along with a forecast of potential market supply by 2023.
Increasing customer demand
Customer demand can be increased through skillful sales and marketing.
Customer demand can also be increased by expanding the serviceable addressable market. This can be done by addressing the previously described adoption challenges either by mitigating or by eliminating. Some areas of opportunity and current best practices follow.
Ticket prices are the fundamental customer adoption challenge.
Ticket prices can be reduced by: reducing margin; reducing costs; and adjusting the product offer so that the cost to deliver is lower.
Roscosmos recently started directly selling orbital space flights. This could give them some pricing flexibility. Up until the end of 2021 all of Roscosmos space tourist customers were acquired through Space Adventures. Space Adventures took a commission estimated to be 10%.
Blue Origin’s original pricing plans were leaked back in 2018; ticket prices were to start at $200,000 to $300,000. However, Blue Origin has never publicly announced their ticket pricing. Furthermore, they have been very careful to avoid talking about pricing.
At this point, it looks like Blue Origin has adopted a price skimming strategy when it comes to setting their ticket price for a suborbital flight. The objective of this price skimming strategy is to exploit the low price sensitivity of Innovators.
Blue Origin used their seat auction as a means to establish the initial pricing and sales funnel. They now have: a prequalified list of high net worth individuals; insight into the starting point ticket price; and insight into what the ticket price sensitivity is.
Blue Origin can be expected to work their way through the 7,800 auction bidders, offering them a “next in line” ticket at the highest price they think the market will bear. Only lowering the price once the demand for tickets at that price starts to decline. Then continuing the cycle again.
This customer adoption challenge can be mitigated through marketing and raising awareness of the safety features and track record of the experience being offered.
Roscosmos and Blue Origin are both moving in that direction with their marketing messaging as evidenced in the following pictures.
This adoption challenge primarily affects orbital space tourism, particularly travel to the ISS.
It is not possible to eliminate this adoption challenge. However it is possible to mitigate by making customers aware of what types of health conditions can be accommodated and controlled. Making customers aware can ensure they do not exclude themselves from pursuing a suborbital or orbital experience because they feel that they are too old.
Blue Origin has taken steps to dramatically highlight that suborbital flight on New Shepard is for the very young and the very old. As of December 2021, they had launched into space the youngest man (18 years old), the oldest woman (82 years old), and the oldest man (90 years old). All three gave enthusiastic endorsements.
Not considered pioneering or unique
The definition of “pioneering” and “unique” is malleable. In the absence of the businesses defining this term it will be left up to the personal opinion and imagination of the customer.
Blue Origin has been the first to recognize the importance of ensuring suborbital flight is viewed as “pioneering” and “unique” for as long as possible. In this regard they have introduced the concept of a customer “Being one of the first 1,000 people to visit space”.
Media coverage makes all customers public figures
This adoption challenge can be eliminated by offering “stealth” flights. No press releases and no media present. It’s up to the customer to say what they want to say and when they want to say it, if ever.
Wait for better products
This adoption challenge can be mitigated by using the scarcity principal of persuasion. The scarcity principle of persuasion means the rarer or more difficult it is to obtain a product, the more valuable it becomes. Because we think the product will soon be unavailable to us, we’re more likely to buy it than if there were no impression of scarcity.
In the case of space tourism, highlighting the “once in a lifetime”, “historical legacy” aspects of the experience is tailor made to being exploited using the scarcity principle of persuasion. Examples of how this could be applied in the context of the customer securing their place in history:
- Be one of the first 1000 people to visit space
- Be one of the last few people to visit the ISS before it is decommissioned
- Be the first person from [country] to visit the ISS
- Be one of the first 10 people to visit the world’s first commercial space station
- Be the first person from [country] to visit space
A generalized sales tool could be created to generate a customized list appropriate to the prospective customer, along lines of:
- Be the first [person | woman | man | private astronaut | LGBTQ+ | one armed man | etc.] of [country] to [visit space | visit the ISS | visit the world’s first commercial space station | walk in space | etc.]
As of December 8, 2021, 251 people from 19 different countries have visited the ISS.
Wait for opinion leaders
Endorsements from people who are well-known and respected can go a long way towards overcoming this adoption challenge. However endorsements do not come for free. It takes planning and focused effort to secure them and ensure the right endorsements are being selected to match the market demographic.
Blue Origin has been aggressively working to address this adoption challenge. They have gone after big names and put them front and center for each launch. So far they have launched William Shatner and Michael Strahan into space in order to secure their enthusiastic endorsement and global media coverage.
SpaceX and Blue Origin have both produced documentaries following customers through the experience from beginning to landing. The documentaries are streaming on Netflix and Prime Video.
Virgin Galactic has announced plans to include a social media influencer on one of their future commercial flights.
Language will be an issue
It is impossible to completely eliminate this adoption challenge. However it is possible to strategically select which languages to integrate into the product offer and operational support infrastructure. The selection of which language to add and when, being driven by how much each language contributes to expanding the serviceable addressable market for the business. After the US, the next three countries with large high net worth populations are Japan, Germany and China.
This customer adoption challenge can be mitigated by operating out of spaceports outside of the US, Russian Federation and Kazakhstan.
Virgin Galactic has expressed it’s intentions to establish spaceport operations in Italy and Dubai.
Blue Origin is working with the UAE government to establish a spaceport in Dubai.
Roscosmos has the potential ability to launch from Europe’s French Guiana spaceport. However, only cargo missions have been launched from that spaceport so far and then there is the question of where would the capsule land.
Ability to service customer demand
Flight capacity constrains a space tourism business’ ability to service customer demand. All space tourism companies are fundamentally constrained by the number of space vehicles available, the number of customers each vehicle can carry per flight, and the lifecycle of each space vehicle.
Number of operational spaceflight systems
Virgin Galactic has 1 operational VMS and 1 VSS to service customer demand. They also have a second VSS that’s currently being readied for flight, but currently not available. They have announced intentions to build their fleet to a total of 2 VMSs and 5 VSSs. This is also the size of the hanger that they have available at Spaceport America. No timelines have been disclosed.
Blue Origin currently has one spaceflight system available to service customers. They have announced plans to build additional Crew Capsules and Propulsion Modules. No numbers or timelines have been disclosed.
SpaceX currently has 3 Crew Dragon capsules available, and have announced that they are building 1 additional. The fourth Crew Dragon is expected to be ready for launch in April 2022. As of October 2021, SpaceX had eight Falcon 9 boosters operational.
Lifecycle of each vehicle
The lifecycle of space vehicles will have a significant impact on the ability of space tourism businesses to service customer demand and grow sales. The lifecycle of a space vehicle includes: how much time must be taken between flights for mission planning, safety checks and refurbishment; how many total flights can a vehicle be used before having to be replaced; and how long does it take to build and bring into service new vehicles.
SpaceX has stated that they expect to reuse a Falcon 9 booster over 100 times before it needs to be replaced. As of May 2021, a Falcon 9 booster has been reused 10 times. The fastest turnaround time on a Falcon 9 booster has been 27 days. As of October 2021, SpaceX had eight Falcon 9 boosters operational allowing for up to 104 launches per year.
Crew Dragon capsules can be reused up to 5 times. There is no information available for Crew Dragon turnaround time. Pending information to the contrary it is assumed that a Crew Dragon can be reused five times in a year.
For every Crew Dragon and 39% of a Falcon 9 booster’s annual launch capacity dedicated to space tourism, SpaceX would be able to launch 5 flights a year. This would deliver an estimated annual capacity of 35 passengers and estimated yearly sales of up to $1.925 billion.
For 2023, it is assumed that there will be the equivalent of 1 Crew Dragon available for space tourism flights. It is assumed that each Crew Dragon will only carry 4 passengers per flight.
Roscosmos has stated that their goal is to launch up to 4 space tourism flights per year. This would give an estimated annual capacity of 8 passengers and estimated yearly sales of up to $480 million. A NASA report stated that construction of a Soyuz spaceflight system typically takes three years.
For 2023, it is assumed that Roscosmos will have 1 vehicle available for space tourism flights.
Virgin Galactic has said the VSS is built to last for 10 years and can be flown up to 50 times a year. Each VSS needs to have its rocket engine replaced after every flight which costs $250K to $275K. Each VSS costs between $30 and $35 million to build. No information has been disclosed on the lifecycle of the VMS.
Virgin Galactic has stated that their goal is to launch 400 flights a year per spaceport. This would give each spaceport an annual capacity of 2,400 passengers delivering estimated yearly sales of up to $1.08 billion. To achieve this with their target fleet size of 2 VMSs and 5 VSSs, Virgin Galactic would have to increase the VSS flight capacity to be 80 per year.
For 2023, it is assumed Virgin Galactic will be operating 1 VMS and 2 VSSs, which will give them a yearly capacity of 100 flights.
Blue Origin has not stated a goal for annual launches. However the turnaround time between the first manned suborbital flight and the second was 37 days, 48 days between the second and third launches, and 59 days between the third and fourth launches. Assuming a minimum of 37 days, this would allow up to 9 launches a year per vehicle. This would give Blue Origin an annual capacity of 54 customers delivering estimated yearly sales of up to $10.8 million and as high as $1.512 billion for each launch vehicle dedicated to space tourism flights. Blue Origin has not released any information on their spaceflight system lifecycle.
For 2023, it is assumed that Blue Origin will have 2 vehicles in operation.
Estimated market supply by 2023
The following table summarizes the estimated annual market supply for space tourism by 2023.