Monopolising in a “Zero-G” environment

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Jia Kho's picture

Space tourism – physically transporting humankind to space, metaphorically transporting Earth into a sustainable future. Private companies have started a race to be a commercial carrier of tourists to space but profitability of this venture is in question. This essay will argue the opportunities that space travel can unlock and ways to realise and capitalise on this childhood dream. Space travel is that small step for mankind towards a sustainable multi-planetary existence and the big picture benefits will be explored in the outset. Presently, the onus is on the frontrunners to pave the way. The first consumers will make or break the prospects of this industry while the first firms who achieve a harmony of business and science will profit. Space travel encapsulates the human desire to discover and it will usher in an age of Universalisation.

Technology, accessibility and sustainability

Space companies are focusing their efforts to build a vehicle that can deliver the “Space Experience” to today’s more adventurous ultra-rich. On the surface, this cause seems neither noble nor profitable, due to the sheer size of capital this seemingly risky venture requires.

A chief concern is developing the technology and ensuring it performs in the crucial area of safety. It is of paramount importance that it successfully transports people to other parts of our world, perhaps even hitherto relatively unexplored planets and all they have to offer. Without access to space, humanity remains confined to the Blue Planet and its resources. Transport can extend the space tourism market in types of offerings. Different space experiences and even applications of supersonic rockets for commercial inter-continental flights. Complementary services will have growth: there will be a demand for accommodation, food and beverage, entertainment activities, and other services.

As our knowledge of space and technology to support its exploration is further refined, accessibility will increase. For now, the price to be a space tourist leaves many excluded. However, cost-savings arise when economies of scale are achieved – more flights will be added to cover the high fixed costs that are inherently part of the young aerospace business. Additionally, cheap and clean energy in the form of nuclear power can be employed, with safer disposal methods in space. Both consumers and corporations stand to profit when space is mass market.

In the long term, another potential benefit is progress into multi-planetary inhabitation. Space inhabitation could be a viable option for future sustainable living. All the prospective industries spawning from an endeavour of this scale would create huge value, far greater than the investment required to instigate this advancement. Mining asteroids for raw materials such as gold, nickel and hydrogen could become economically feasible to sustain Earth’s growing consumption trends or even to support a space civilisation. In a similar fashion to how a closed-market economy opens to an open market economy, travel and trade will reveal the Final Frontier’s possibilities.

The Allure – for pleasure or for business?

The profitability of space travel relies on the success of pitching this exclusive experience to high net-worth individuals. Market research has concluded that Earth sight-seeing is the most desired activity, followed by space walks, observing outer-space and playing in weightlessness. In the immediate future, charges will be high due to low volumes and high fixed costs, Virgin Galactic have set their ticket to $250,000 per person. Current technology is largely intent on providing five to six minutes of weightlessness and viewing Earth above the atmosphere, which many consumers may argue does not warrant the price tag. Marketing these experiences must seek to sell a full and elegant ideal; the privilege to be an astronaut, the chance of a lifetime, and being one of the first to come into contact with a whole new level of living. The opportunity cost of $250,000 can be compared to a Ferrari, a plaything for many of society’s most wealthy. Clearly, the selling point becomes the type of lifestyle that is afforded by either option, targeting the motivation to appear luxurious and of higher social standing. These are the behaviours of the consumerist target customer and clever marketing must be employed to satisfy these wants. Tailoring the experience to suit the clientele can add value and translate to higher premiums. For example, giving the client the benefit of flying over their home country would be an appreciated amenity.

As the space industry evolves, wealthy business types will have an interest to exploring outside the boundaries of Earth for business purposes. They will seek new opportunities and potential resources. To capture this demand, Conquistador-style quests can be introduced. Entrepreneurs will be part of the advancement of space industrialisation and these trips can further the mission of sustainable living. The supply must be created to attract demand and space travel facilitates this! Imagine space internet, space Hiltons and maybe even the need for space Chanel.

The affluent will be the frontrunners in space travel and marketing should exploit the scarcity of this service. But plans for by-product industries will be worthless without mass-market demand. Adaptation of marketing will be integral to take space tourism mainstream, carving out future public interest in space settlements. The symbiotic relationship of supply and demand must be acknowledged. Businesses and consumers must explore space in tandem.

Survival of the First

Space travel and aviation have common issues of high fixed and labour costs and commodity exposure. Aerospace transport projects require huge amounts of funding, but space settlements and space industrialisation cannot progress without viable transportation. Efforts in resource and development to make this technology a reality is risky but necessary and a breakthrough cannot be guaranteed. Business strategy can overcome the operational barriers of finance and an excellent example is SpaceX.

SpaceX, a company that specialises in creating advanced spacecraft and its founder, Elon Musk, have overcome financing challenges that other space companies face through diversification. Revenue streams are necessary for any business model and to support ongoing R&D, NASA contracted them for various space launches that allows their cutting edge and expensive rockets to generate profits. Plans to establish a satellite internet system to increase connectivity in remote and developing parts of the world will pay off if successful. The second issue is of cost structure. Coordinating commercial space flights would require extensive safety, air control, maintenance staff but reducing regulations and labour unions would reduce expenses. Reusable rockets have differentiated SpaceX from competitors as one craft costs $54 million while fuel per lift-off costs $200,000. Cost reductions have a limit as labour costs to ensure safety cannot be compromised, so market share and bargaining power is crucial to maintain profit margins. 

Impeding imitation from other firms and monopolising the market through patenting technology is key to survival in a small market. Creating a virtuous cycle of a profitable consumer craft will allow reinvestment of profits. Inventing other types of space transportation (launch loops, teleports) or using space rockets for trans-Atlantic travel, saving time and money. Firms can branch out to offering space services (such as Air Asia’s integrated hotels and insurance) and this will enhance brand value. 

Firms that are betting on the realisation of space development stand to gain a lucrative monopoly on space travel. The initial domination of the market will be financially advantageous for the company to seize, but continual reinforcement as a market leader ensures long-term prosperity.

The Final Frontier

The progression of this industry will start with the seed of tourism, targeted towards the wealthy with the focus of adding value. Subsequent growth towards mass market will increase profitability exponentially. The continuous exploration of the capacity for multi-planetary inhabitation can fuel this promising industry for years to come. Space travel ignites a catalyst for this profitable sequence of events and the few brave and smart enough to believe are pursuing this dream. 

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