Commercial Viability Evaluation of the Suborbital Space Tourism Industry

Abstract

This article provides an evaluation of the commercial viability of the suborbital tourism market while considering the large uncertainties in the current demand predictions. Since it is unlikely that future demand forecasts will be significantly more precise, an analysis that takes these uncertainties into account is needed. Our study addresses this problem by using a Monte Carlo simulation to calculate the distribution of possible results in commercial terms (net present value [NPV] developed from a discounted cash flow analysis). By conducting a sensitivity analysis, we identify the most impactful factors in development and create a probability distribution of their uncertainties. Previous work done by the authors defined a design space of 33 suborbital vehicle architecture from which we picked for the purpose of this article optimal architecture number 4 with 1 pilot (this is the same architecture as XCOR's Lynx). Data from studies are used to model the distribution of the demand and its uncertainty. The cost model is mainly based on cost estimation relationships from one study. We implement several decision rules to simulate 5 different commercial strategies a company in this sector might have. We found that there are 2 dominant commercial strategies: a riskier strategy with an aggressive fleet expansion with a large vehicle (16 participants, average expected NPV is $2.8 billion, 41% chance of incurring losses) and a less risky strategy with a neutral fleet expansion and a medium vehicle (4 participants, average expected NPV is $2 billion, 33% chance of incurring losses). We conclude that the suborbital tourism market can probably be made commercially attractive by proper management of development, even in the face of significant uncertainty.