OpEd: The Business of Personal Spaceflight

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  Space News Business

OpEd: The Business of Personal Spaceflight

By CARISSA BRYCE CHRISTENSEN

posted: 21 October 2008
04:34 pm ET






The truly new industry of personal spaceflight is poised for liftoff.

Providers in the
United States
and
Europe
are preparing to offer suborbital flights to consumers, possibly within two years. New orbital flights and on-orbit platforms are also in the works, though with a longer lead-time to availability.

Suborbital personal spaceflight is the open door to mass market space tourism, and it is imminent. The technology challenges are being met. The real question is – can the business challenges be met as well?

Too many ventures have proffered brilliant technology, only to fail in the marketplace. In the space arena, the archetype is Iridium. Despite technological breakthroughs creating a satellite system that remains operational today, paradigm shattering manufacturing and deployment, and excellent financing, the Iridium venture was a business failure, ending in a $5 billion loss.

We as an industry demand commitment and capability from the technical side of our ventures; however, we still struggle to demand the same from the business side. Hard-nosed analysis is a vital adjunct to disciplined engineering and entrepreneurial vision; it yields improved decisions and a better bottom line.

The success of the personal spaceflight industry depends on its ability to meet the business challenges it faces. The most powerful of those challenges stem from pricing.

The price of a brief suborbital flight is projected to exceed $100,000. A proportion of the population (though tiny, and arguably getting tinier) is able to treat that level of outlay as routine discretionary spending. Providers expect additional demand from space enthusiasts and adventurers willing to spend savings, finance with debt or forego multiple alternative vacations. They also see potential markets for science and (in the longer term) cargo payloads.

Embedded in this market model is tremendous uncertainty about true levels of consumer interest (even given initial deposits), uptake timing, price elasticity, and the durability of demand. While economies of scale may enable lower flight prices over time, it is also possible that operations will be more expensive than anticipated.

The reality is that initial flight revenue alone will probably be insufficient to sustain all of the providers developing suborbital capability today. The nascent industry would benefit greatly from an expanded customer base and multiple sources of revenue. To increase consumer revenue potential, providers in the industry can enhance their product offerings; create an iconic, enticing brand for personal spaceflight; and expand their target markets, while continuing to monitor their business cases with rigor and objectivity.

Enhanced product offerings

The personal spaceflight industry can offer experientially rich products and services to match perceived value to price. The industry has to provide value-added products and services that extend beyond the flight experience for an individual, to capture and build consumer interest, and generate robust, growing revenue streams from a broad audience.

Related experiences could range from theme park rides and attractions, to education and entertainment, to simulations of spaceflight and microgravity. Providers can expand their revenue base by offering a range of spaceflight-related experiences, to involve the many who cannot afford a suborbital flight. The collaboration of the New Mexico Spaceport Authority and Virgin Galactic on Spaceport
America
infrastructure is a positive sign that these additional markets are being considered.

Create iconic brand

There are iconic vacation and adventure experiences that most consumers immediately understand: an African safari, a family trip to
Disneyworld
, an
Alaska
cruise, a Hawaiian vacation. Higher end variants of these trips cost easily $10,000 to $20,000, and even basic versions generate several thousand dollars, from thousands of families and groups, with many repeat visits. Access to that market could dramatically expand and enhance the $100,000 per flight revenue stream from once-in-a-lifetime space travelers.

This successful branding of an experience offered by many providers reflects a combination of the experience itself and excellent marketing and advertising. A trip to the spaceport, even without the individual flight experience, could become the next “must-have” experience for families, or the space enthusiast’s way to get as close as possible to spaceflight, at a more affordable price.

Increase target market

Personal spaceflight providers need to gain access to the largest possible consumer base, including groups that aren’t always viewed as having interest in space. For example, a key market to consider is seniors – the massive group of retiring Apollo-era baby boomers, who remain active and solvent to increasing ages. Another is the growing number of women pursuing adventure travel. A core demographic is families and other groups that could accompany a spaceflight client.

Protecting personal spaceflight business venture revenues by creating a diverse product set and attracting a broad consumer base is an even more vital strategy given today’s profound economic uncertainty.

The personal spaceflight industry needs to combine this strategy with the strong assets in hand already: safety-conscious providers, demonstrated technology breakthroughs, success-oriented leadership at industry regulator Federal Aviation Administration Office of Space Transportation, deep-pocket investors who are as interested in success in space as they are in ROI [return on investment], and mainstream media interest and enthusiasm.

Personal spaceflight providers have the opportunity to create product and service offerings that let many consumers experience the wonder of space. Providers can build an engaged and growing market, increasing volume and eventually reducing prices, so that even more people can experience space first hand. And, ultimately, they can create successful mass market personal spaceflight with true potential to transform our world.

Carissa

Bryce Christensen is Managing Partner of TheTauri Group, in Alexandria, Va.