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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


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3

Introduction


4

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


5

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


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


7

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


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]



1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000


Pric

e Pe

r Pou

nd P

aylo

ad [$

/lb]

20

25

30

35

40

Flig

ht R

ate

[Flig

hts

Per

Yea

r]



1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000


Pric

e Pe

r Pou

nd P

aylo

ad [$

/lb]

20

25

30

35

40

Flig

ht R

ate

[Flig

hts

Per

Yea

r]



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


8

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


11

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


16

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


20

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%




21

Business Case Modeling and Analysis


22

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)


23

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


24

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


26

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


27SpaceWorks Engineering, Inc. (SEI)

www.sei.aero

27

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


29

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]

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