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SpaceWorks Engineering, Inc. (SEI)www.sei.aero
1
THE EMERGING ORBITAL SPACE TOURISM INDUSTRY: New Insight into Demand and Prospects for SuccessAIAA-2006-7478AIAA Space 2006 Conference18-21 September 2006, San Jose, California
Revision A19 September 2006
Mr. Dominic DePasqualeSystems EngineerSpaceWorks Engineering, Inc. (SEI)[email protected]+770.379.8009
Mr. A.C. CharaniaSenior FuturistSpaceWorks Engineering, Inc. (SEI)[email protected]+770.379.8006
Contents
IntroductionBackground to this EffortOrbital Space Tourism SurveyBusiness Case Modeling and AnalysisConclusions
SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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SpaceWorks Engineering, Inc. (SEI)www.sei.aero
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Introduction
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About SpaceWorks Engineering, Inc. (SEI)
Overview:- Engineering services firm based in Atlanta (small business concern)- Founded in 2000 as a spin-off from the Georgia Institute of Technology- Averaged 130% growth in revenue each year since 2001 - 85% of SEI staff members hold degrees in engineering or science
Core Competencies:- Advanced Concept Synthesis for launch and in-space transportation systems- Financial engineering analysis for next-generation aerospace applications and markets- Technology impact analysis and quantitative technology portfolio optimization
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Practice AreasSpace Systems Analysis | What is the System?Conceptual Level Engineering AnalysisConceptual Level Engineering DesignLife Cycle AssessmentCost EngineeringAdvanced / Robust Design Processes
Technology Prioritization | What are the Implications? Technology AnticipationTechnology Benefit AssessmentsTechnology Prioritization
Financial Engineering | Is the Project Viable?Business DesignFuture Venture Due DiligenceReal Options Analysis
Future Market Assessment | What is Next?Scenario PlanningMarket ForecastingMarket Analysis
Policy and Media Consultation | How to Express the Vision?Government InitiativesPolicy ConsultationTelevision, Film, Radio, Internet Presence
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6
Sample Performance Analyses
Note:Data generated through SENTRY model and exported to data visualization program for eventual display
Sample Thermal Analysis:Maximum RLV Orbiter Entry Surface Temperature (via SENTRY)
Sample Thermal Analysis:Maximum RLV Booster Entry Surface Temperature and TPS Tile Thickness (via SENTRY)
TOP VIEW UNDERSIDE VIEW
Sample Trajectory Analysis (via POST):
0.00.51.01.52.02.53.03.54.04.5
0 100 200 300 400 500 600Time (s)
Mlb
Thrust
Weight
Thrust and Weight vs. Flight Time
050
100150200250300350400450
0 100 200 300 400 500 600Time (s)
Altit
ude (
thou
sand
s of f
t)
Altitude vs. Flight Time
Optimized transitionto SSME-only
Relative Velocity and Mach vs. Flight Time
0
5,000
10,000
15,000
20,000
25,000
30,000
0 100 200 300 400 500 600
Relat
ive V
elocit
y (ft/
s)
0
5
10
15
20
25
30
Mach
Num
ber
Time (s)
Relative Velocity
Mach
“Net” ISP (SSME and RD-180) vs. Flight Time
0
100
200
300
400
500
0 100 200 300 400 500 600
Time (s)
ISP
(s)
SSME
RD-180“Net” Value
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Sample Economic Analyses
Human Exploration Cost Estimates Scenarios of Reusable Launch Vehicle (RLV) Price Sensitivity
500
1,500
2,500
3,500
4,500
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
40
60
80
100
120
140
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
500
1,500
2,500
3,500
4,500
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
40
60
80
100
120
140
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
1,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
25
30
35
40
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
1,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
25% 50% 75%Turn-Around-Time Reduction
Pric
e Pe
r Pou
nd P
aylo
ad [$
/lb]
20
25
30
35
40
Flig
ht R
ate
[Flig
hts
Per
Yea
r]
Price Per Flight [$/lb]
Flight Rate [Flights/Year]
Oper
atio
ns C
ost R
educ
tion
DDT&E AND TFU COST REDUCTION25% 75%
25%
75%
Components of LCC (FY06)
Other (Robotic/ISS/Shuttle)
CEV/CM
CLV
LSAM
CaLV-HLLV
EDS + CEV/SM
Technology Maturation Surface Systems
Facilities, Operations, and Flight Tests
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Year
$M
$111.3 B (2006-2018) $53.4 B (2019-2025)$164.7 B
NASA FY06 Exploration-Related Budget
See: http://www.sei.aero/library/technical.html for more information and technical papers on above analyses
Space Tourism Economic Modeling International Space Station (ISS) Support Market
-100M
-50M
0M
50M
100M
0 2 4 6 8 10 12
Disc
ount
ed C
umul
ative
Ca
sh F
low
(US
$)
Project Year
Effect of Competition
Higher-End Operator
In Competition with Higher-End
Lower-End Operator
Effect of Market Entry Date
0 2 4 6 8 10 12Project Year
-40M-20M
0M20M40M60M80M
-60M-80M 2 Year Market Delay
4 Year Market Delay
Higher-End Operator
Lower-End Operator
5 Commercial Competitors + min. 2 CEV/Yr + Russian Competition
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SEI’s Background Related to Economics of Emerging Commercial Space Transportation
Sample Economic Analysis Tools:- NESC (Nodal Economic Space Commerce Model, agent-based space market simulation financial tool) - CABAM (Cost and Business Analysis Model, general space transportation)
- LMNoP (Launch Markets for Normal People, tourism model)
Recent Projects:-Economic Development of Space (EDS)sponsored by NASA Langley Research Center-Simulating Emerging Space (SES) Industriessponsored by NASA Marshall Space Flight Center
Recent Papers (www.sei.aero):-Charania, A., DePasquale, J., "Agent-Based Modeling of the Space Tourism Market," ISDC 2006-355, 25th International Space Development Conference, Los Angeles, California, May 4-7, 2006.-Charania, A., Bradford, J. E., Olds, J. R., "Economic Development of Space: Examination and Simulation," IAC-05-E3.3.08, 56th International Astronautical Congress, Fukuoka, Japan, October 17-21, 2005.-Olds, J. R., "A Review of Technology Assessment Methods for Space Transportation Systems," GT-SSEC-B.6, First Annual Georgia Institute of Technology Space Systems Engineering Conference, Atlanta, Georgia, November 8-10, 2005.-Charania, A., DePasquale, D., "Simulating the Dynamic Marketplace: An Introduction to the Nodal Economic Space Commerce (NESC) Model," AIAA-2005-6617, Space 2005, Long Beach, California, August 30 - September 1, 2005.
Sample Clients and Partners:
NESC ModelSub-orbital Public Space Flight Market
NESC ModelCommercial Support of the
International Space Station (ISS)
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Background to this Effort
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Entrepreneurial Space and Emerging Space Tourism Companies
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Contributions of this Effort
Two Case Studies:- Orbital Space Tourism: Passengers aboard a spacecraft in Low Earth Orbit (LEO)- Orbital Space Tourism with a Hotel Destination: Passengers are delivered to a space hotel in LEO
Market Survey- What is the future market for orbital space tourism activities?- Surveyed a select group of experts and the general public about market characteristics and demand
Market Simulation- Can an orbital space tourism provider be financially successful in this emerging market?- Deterministic and probabilistic modeling of a representative orbital space tourism company
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Orbital Space Tourism Survey
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Orbital Space Tourism Survey
Administered via the Internet using Survey Monkey
Two groups of participants:- Select invited experts- Members of the general public
Questions targeted:- General market characteristics- Market size and elasticity
Responses received from at least 8 different countries, NASA, several aerospace industry companies, and several American universities
Summary of Surveys ConductedSurvey Type o f
RespondentsDate Opened Date Closed Number of
ResponsesOrbital Space
TourismExperts March 15,
2006May 6, 2006
6
Orbital Space Tourism
Public March 27, 2006
May 6, 2006
99
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International Participation in Orbital Space Tourism
0%
10%
20%
30%
40%
50%
60%
0% 10% 25% 50% 75% 90% 100%
Percentage of Orbital Space Tourists that will be U.S. Citizens/Residents
Perc
enta
ge o
f Sur
vey
Res
pons
esPublicExperts About half of
tourists will be U.S. residents; Japanese will comprise the next largest
group
Countries other than the U.S. with the Highest Demand for Space Tourism
Country Rank Expert Opinion Public Opinion1 Japan Japan2 Great Britain Great Britain3 China Russia4 India Germany5 Korea China
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Safety Required to Attract Customers
0%
10%
20%
30%
40%
50%
60%
70%
Expendable Rocket Space Shuttle Military Fighter Commercial AviationFlight
Comparable Level of Safety Needed to Attract Space Tourism Customers
Perc
enta
ge o
f Res
pons
es
PublicExperts
Orbital space tourism vehicles
should be at least as safe as a
military fighter plane
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Adoption Rate and Market Size
0%
10%
20%
30%
40%
50%
60%
Slow Adoption,Limited Market
Slow Adoption,Broad Market
Fast Adoption,Limited Market
Fast Adoption,Broad Market
Perc
enta
ge o
f Res
pons
es
Public
Experts
The market for space tourism
services is limited
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Start of Space Hotel Market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1-5 years fromtoday
5-10 years fromtoday
10-15 years fromtoday
15+ years fromtoday
Never
Earliest Date for Orbital Space Hotels
Perc
enta
ge o
f Res
pons
es
PublicExperts
Tourists will likely begin
visiting space hotels 10 to 15
years from today
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Expectations of Companies in the Space Tourism Marketplace
0%
10%
20%
30%
40%
50%
60%
70%
No Companies 1 Company 2 Companies 3 Companies 4 or moreCompanies
Number of Companies
Perc
enta
ge o
f Res
pons
es
PublicExperts
Survey takers also indicated that these companies would garner half of their revenues from tourism services and half from other sources
Survey takers expect companies to change their prices once every six months to a year
Two or more companies can
exist in the orbital space
tourism market
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Demand for Orbital Space Tourism Without a Hotel Destination
0
0.05
0.1
0.15
0.2
0.25
0.3
0 20 40 60 80 100 120 140
Potential Customers
Prob
abili
ty D
ensi
ty
$5 M$10 M$20 M
$5M Price
$10M Price
$20M Price
Confidence in estimates
increases as price point
approaches $20 million
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80
Potential Customers
Prob
abili
ty D
ensi
ty
ExpertPublicAverage
Survey Demand Response Aggregation Process
Mean: 17.8
Mean: 44
Mean: 123
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0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0 20 40 60 80 100 120 140 160 180 200 220
Potential Customers
Prob
abili
ty D
ensi
ty
$5 M$10 M$20 M
Demand for Orbital Space Tourism With a Hotel Destination
$5M Price
$10M Price
$20M Price Survey takers are less certain in their estimates of space
tourism with a destination than
without a destination
Increase in mean as compared to without a destination: 22%
Increase in mean as compared to without a destination: 57%
Increase in mean as compared to without a destination: 97%
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Business Case Modeling and Analysis
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Modeling Demand
Futron Derived demand curve generated by using survey data from 2002 Space Tourism Market Study by Futron Corporation / Zogby Int’l
- Population of millionaires determined from Merrill-Lynch World Wealth Reports and Forbes Billionaires List
- Base population limited for interest, ability to afford a ticket, willingness to participate, and physical fitness
Weighted is 50% Futron Derived, 25% SEI Survey Experts, and 25% SEI Survey Public
0
50
100
150
200
250
300
$0 M $5 M $10 M $15 M $20 M $25 M
Ticket Price ($M/Passenger)
Ann
ual C
usto
mer
s (P
asse
nger
s/yr
) WeightedFutron DerivedSEI Survey ExpertsSEI Survey Public SEI Survey
demand curves predict lower demand than those derived from FutronSTMS data
Demand Curves for Orbital Space Tourism (without a destination)
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Modeling Supply
Design and Development from 2007 until 2008 Fleet acquisition and ground facility development from 2008 until 2009Initial Operating Capability (IOC) of the project is assumed to be 201010 years of flight operations ending in 2019
2.1 %Inflation30 %Tax Rate
$3 M / yearSGA Expenses per year7.5 %Avg. Nominal Interest Rate
3 Debt to Equity Ratio$200 MCapital On Hand
Programmatic and Financial Assumptions
Probabilistic Variables
Parameter Minimum Most Likely MaximumDDTE 100 225 300TFU 52 66.5 84Fixed Ops Cost / Yr 5 5.75 6.8Variable Ops Cost / Flight 5.5 49.6 76Facilities Development Cost 30 50 100Maximum Number of Flights 5 12.5 30
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Deterministic Results
Orbital Space Tourism Net Present Value (NPV)
Orbital Space Tourism with a Hotel Destination NPV
Minimum Price for Financial Viability, NPV = 0
There is potential for an orbital
space tourism company to be
financially successful at a price of ~ $12 M
Simulation CaseLEO Tourism without a Hotel
DestinationLEO Tourism with a Hotel
Destination5% 11.90 11.69
10% 12.66 12.32
Mar
ket
Ris
kPr
emiu
m
20% 14.95 14.20
Price$10 M $15 M $20 M
5% -1,048.22 1,134.00 1,459.66
10% -948.32 609.19 878.26
Mar
ket
Ris
kPr
emiu
m
20% -785.69 89.68 287.13
Price$10 M $15 M $20 M
5% -932.21 826.95 990.14
10% -842.46 418.39 566.03
Mar
ket
Ris
kPr
emiu
m
20% -697.67 17.33 139.46
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Probabilistic Results for Orbital Space Tourism Case (1000 Trials)
Orbital Space Tourism Mean Net Present Value (NPV)
Orbital Space Tourism >90% Certainty NPV
Mean NPV values are higher than
deterministic results, however, histograms show possibility of financial failure at
higher risk premiums
Frequency Chart
$M
.000
.008
.015
.023
.030
0
7.5
15
22.5
30
-223.96 -7.84 208.29 424.41 640.53
1,000 Trials 4 Outliers
Forecast: Net Present Value (NPV)
Histogram of LEO Space Tourism (Without Destination) Company NPV at $20M Passenger Price and 20% Market Risk Premium
Price$10 M $15 M $20 M
5% -475.52 1,105.16 1,111.39
10% -510.27 621.22 663.31
Mar
ket
Ris
kPr
emiu
m20% -503.62 136.43 203.47
Price$10 M $15 M $20 M
5% -2,605.43 7.89 544.44
10% -1,994.11 -146.28 263.31
Mar
ket
Ris
kPr
emiu
m
20% -1,302.45 -276.64 -13.53
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Probabilistic Results for Orbital Space Tourism With a Destination Case (1000 Trials)
Orbital Space Tourism with Destination Mean Net Present Value (NPV)
Orbital Space Tourism with Destination >90% Certainty NPV
Option of a hotel destination for
tourists could yield hundreds of millions more for an orbital
space tourism company
Histogram of LEO Space Tourism (With Destination) Company NPV at $20M Passenger Price and 20% Market Risk Premium
Frequency Chart
$M
.000
.005
.011
.016
.021
0
5.25
10.5
15.75
21
-174.89 106.29 387.47 668.65 949.83
1,000 Trials 4 Outliers
Forecast: Net Present Value (NPV)
Price$10 M $15 M $20 M
5% -472.51 1,512.73 1,630.44
10% -530.70 885.93 1007.53
Mar
ket
Ris
kPr
emiu
m20% -543.21 252.75 368.15
Price$10 M $15 M $20 M
5% -3,104.14 125.52 864.21
10% -2,346.54 -87.69 471.90
Mar
ket
Ris
kPr
emiu
m
20% -1,520.60 -264.44 75.48
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Conclusions
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Conclusions
Representative single companies existing in the orbital space tourism industry can achieve a positive Net Present Value (NPV)
Modeling shows that given reasonable inputs for company cost structures based upon assumptions of new Earth-to-Orbit vehicles, LEO tourism prices could be below current market prices (i.e. ISS space tourist prices)
- At these lower prices, a company could still be viable
The public generally underestimates demand, especially at low price points, as compared to demand estimates derived from wealth data and surveys of actual high net worth individuals
- Experts forecast an even lower demand than the public- Confidence in forecasting orbital space tourism demand decreases at lower prices for
both experts and the public alike
Survey respondents believe complementary goods increase the market size, generally forecasting greater demand for orbital tourism with a hotel as opposed to orbital tourism without a hotel
Mean probabilistic NPV output results for most markets turned out to be better than the deterministic NPV values
- Possibly due to distribution on the growth rate, and skewed cost distributions, thus more significant variables play a part in the analysis
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www.sei.aero
Business Address:SpaceWorks Engineering, Inc. (SEI)1200 Ashwood ParkwaySuite 506Atlanta, GA 30338 U.S.A.
Phone: 770-379-8000Fax: 770-379-8001
Internet:WWW: www.sei.aeroE-mail: [email protected]