Space Tourism Is In The Air.
Richard Branson is officially an astronaut. Now, Virgin Galactic Holdings Inc.’s true test begins: Can it translate his flight into a steady stream of space tourists?
Virgin Galactic shares, which have attracted a big retail following, fell 17% after the company said it could sell up to $500 million in stock. The basic problem of Galactic’s business model will be whether demand for space travel is sustainable. Analysts have been trying to figure that out, looking at various comparatives, from the use of private jets to the number of people who have climbed Mount Everest.
The 90-minute flight was a critical marketing moment after years of slow progress and setbacks. A 2014 failed launch resulted in the death of a Virgin crew member.
Mr. Branson’s role was to assess the experience for a private customer, from training, to how the company helps passengers build confidence before takeoff, to the actual launch into space. For new astronauts, that process is being streamlined to between 5 and 7 days.
Mr. Branson said he has inserted himself into the customer experience of many of his entrepreneurial ventures, including airlines, cruise lines and trains. “I’ve written down 30 or 40 little things that will make the next experience for the next person who goes to space with us that much better,” he said after the flight.
In the next few months, two more flights are set to take off, one more manned by Virgin crew and a second carrying members of the Italian Air Force. Starting next year, the company’s commercial space flights will begin in earnest from 2022 as it aims to increase to some 400 flights a year.
To get to that number of flights the company will likely need “high-single-digit to low double-digit number of spaceships. From there, Virgin Galactic is preparing to build additional spaceport facilities, potentially in other countries.
About 2 million people can afford to go to space, with that high-net-wealth population growing at around 6% each year. Virgin needs to transport around 1700, or about 0.08% of those individuals, to space each year for its model to work.
What aspiring astronauts are willing to pay isn’t yet clear. Blue Origin received more than 20 bids in excess of $4.8 million to grab the first seat on its first passenger mission, which analysts say indicate a high level of untapped demand. Space tourism could generate close to $4 billion in annual revenue by 2030. Virgin says it is aiming to generate $1 billion for every spaceport it constructs.
As of March 2021, Virgin Galactic had about 600 bookings, priced at an average of $250000, with $80 million in deposits from would-be astronauts.
The price point for tickets will likely rise to between $300000 to $400000 per ticket, with prices potentially becoming more accessible as operations scale and costs reduced.