In the light of Virgin Galactic’s recent announcement of the possibility of doing an orbital “SpaceShip 3” if their SpaceShip 2 is succesful enough, I ran into a rather interesting bit of information this afternoon regarding orbital tourism. I had been poking around a NASA website that had copies of the final CER reports from the various companies that had been picked for the round one paper studies for the CEV. I saw some other interesting ideas (and noticed some interesting trends) that probably deserve their own post when I get time, but the thing that really stuck in my mind was from t/Space’s presentation [Note: This is a ~3MB PDF file, the part discussed below starts on page 44 if you want to follow along–Jon]. Most of the stuff in their presentation was covered by them at the RTM VI conference, but the part they hadn’t mentioned was a study performed on the prospects of orbital tourism.
On doing a little further research, I’m no longer clear if they (or Futron) did additional research on the topic, or if these numbers were just a reanalysis of the original results of Futron’s 2002 Space Tourism Market Study. However, the results are still interesting. I happened to have a .pdf copy of the Futron study on my computer, so I just reread all the sections talking about orbital tourism. What appears to be the key difference between the forecasts that Futron came up with for orbital tourism, and the numbers that t/Space did had to do with the following key assumptions:
- Futron assumed that the Soyuz would be the only available space tourism vehicle between now and 2015
- Futron assumed that the price would start at $20M and decline gradually to $5M per person over the next 15 years
- Futron assumed that all flights would require 6 months of training in Russia
The key thing that t/Space noticed was that as the price dropped, the interest rises rapidly. As they point out, while there are only about 6,000 houses worldwide that have a net value of $200M or more, there are 100,000 with a net value of $20M or more. Futron noted that for suborbital flights, most wealthy people are only willing to spend about 1.5-5% of their net value on the flight, but that for orbital flights, the amount Tito and Shuttleworth paid was closer to 7-10% of their net value. Truly wealthy people usually only have a small amount of their value in readily liquid assets, most of their value is in things like stocks, bonds, houses, rental properties, etc. The key as t/Space saw it was to reduce the price far enough that a much larger market segment would be interested.
Based on the idea of a lower-cost vehicle (ticket price $1-5M), that was designed to be more spacious and comfortable, operated out of the US, and requiring only 1 month of training, and capable of flying as often as they had passengers, they used the results from the Futron study to come up with an estimate of demand and revenue. They showed results for both the 1.5% and the 5% of net value levels (instead of the 10% assumed by Futron), and for ticket prices of $1M, $2.5M, and $5M. They didn’t include a deduction of interest in latecomers due to the “pioneering reduction” like Furton did, and they assumed that flying from the US would increase the worldwide demand by the same amount as it would the US demand (Futron assumed only North Americans would be more likely to fly if the vehicle were American). The S-curve approach they used to model acceptance over time seemed a little different too. While the initial ramp up was rather slow at first(only 1% of the total pool of those who would be interested were assumed to fly per year), the percentages they assumed toward the far end of the column seemed way too high. 97% of those interested flying every year? Yeah right. Admittedly, the number of high net worth households should increase substantially over the next several years as nations like China, India, and Russia join the first world, but I still would only take anything much past 10 years with the appropriate sized grain of salt.
All that said, the results were rather impressive.
Assuming the worst case numbers (that most people would only spend 1.5% of their total net value on the trip), the total first year revenue was between $40M and $340M, with the lower ticket prices ($1M and 2.5M) being much higher revenue than the $5M. By 2015, anywhere from $350M to $3B in revenue per year was likely. That’s starting to get rather respectable. That’s also still assuming only 8% of the total available people who fit all the requirements would be interested.
One interesting piece of data. If you assumed the 5% of net value level of interest, the highest revenue predicted was for the $2.5M ticket, while if you assume that people will only pay 1.5%, the $1M ticket is much better. What that seems to mean is that as orbital spaceflight becomes more common, ticket prices will need to drop in order to increase revenue further to offset the “pioneer deduction” effect Futron mentioned.
Anyhow, I just thought I’d draw attention to this analysis. While it assumes several things that don’t exist yet (low cost, high flight-rate RLVs being the biggest one), it really does show the potential scale of the market involved. If a company can develop an RLV for a cost low enough that they could still offer $1M tickets and still make money, they will likely do very, very well.
I wonder how these numbers would play out for a commercial lunar flyby or for a lunar landing….