Is the Space Tourism Bubble Popping?

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As I watch companies lay off tens of thousands of employees every week (and sometimes every day), I’m beginning to wonder if we’re watching another space bubble burst. If so, it is second such deflation in the last decade.

The first bubble – which occurred at the turn of the century – is chronicled in Michael Potter’s documentary, “Orphans of Apollo: The Battle of the Mir & the New Space Revolution.” Potter’s film recounts telecommunications billionaire Walt Anderson’s briefly successful – but ultimately fruitless – effort to lease the Russian Mir space station in 1999.

Anderson’s grand plan failed for several reasons, not least of which was opposition from NASA and the Clinton Administration which wanted the Russians to focus on building the International Space Station. The U.S. government’s opposition was not, in itself, fatal to the project; it could have been overcome with sufficient tact and political smarts (both of which Anderson – now serving a 10-year sentence in federal prison for tax evasion – lacks in spades).

No, the film makes clear that what ultimately killed the wounded Mir project was the dot.com bust of 2000-01. Anderson had invested heavily in Internet companies, and many of his suddenly wealthy friends had been keen to invest in their own private space station. When that money suddenly went away, Anderson’s last hope for saving Mir from a watery grave in the Pacific vanished with it.

Some of those who either got out of the first bubble with their wealth intact – or prospered in the resulting recovery – have invested heavily in space activities or gone into orbit as millionauts. Elon Musk, Jeff Bezos, John Carmack, Anousheh Ansari, Mark Shuttleworth, Richard Garriott, Charles Simonyi – all made their fortunes in Internet, telecommunications or software.

And here we are in the midst of another economic bubble popping just as the nascent space tourism industry seems ready to take off. Can the industry weather such a downturn? Will the money from investors and customers suddenly dry up? It’s very difficult to say, not knowing the extent of the downturn or the true state of the companies involved.

Make no mistake, these companies are vulnerable. Eric Anderson can talk about how good business is for Space Adventures’ orbital joyrides. But, his company’s efforts at building a suborbital tourism vehicle are reportedly floundering. It must be a bit more difficult these days for the firm’s subsidiary, Zero G, to continue selling parabolic flights at more than $5,000 apiece.

Virgin Galactic likes to talk about the hundreds of customers it has signed up, but how many of these flights are fully paid? My guess is not many. For would-be millionauts, putting down 10 percent on a $200,000 flight has been a shrewd bargain. They have received years of publicity, great professional contacts, invitations to exclusive events, the “hey, you’re the millionaut guy” recognition when they walk into business meetings. What’s not to like, really? The fact that Virgin Galactic is taking years to fly is not much of a problem; it just spreads out the investment and extends the benefits over more years.

By the time your flight is scheduled, who knows where a typical millionaut will be by then? You may not have the money. The flights may look riskier than you first thought. Or maybe you’ve had a child in the meantime, and the prospect of never seeing little Johnny Jr.’s adorable face again is too frightening to contemplate. You can’t do that to J.J.

So, you stay on terra firma, write off your deposit as money well spent, and get on with your life. It’s Richard Branson and his investors who take the hit. They got plenty of money, so why worry?

It will be interesting to see how this lays out. The emerging space tourism industry may whether the downtown quite well. There may be enough people out there with enough money to sustain the effort. But, if things keep getting worse, we could see an industry whither just as the effort to save Mir did nearly a decade ago. Time will tell.

  • Nickolai_the_Russian_Guy

    I don’t think we’re going to see a downturn like there was with Mir. An important thing to remember about that list of names you mentioned is that most of them have already made their money. i.e. it’s real cash we’re talking about not just stock options.

    Plus, several of the companies these people are investing in/running are doing quite well. SpaceX just secured the contract with NASA, and while NASA might face funding shortages, it’s unlikely they’d cut out what has so far been a very successful program.

    Virgin Galactic has gotten plenty of deposits. We might not know exactly how much, but I remember seeing on your site some time ago that as the financial downturn began, VG got even more business! They attributed it to investors taking their money out of risky markets, and suddenly not knowing what to do with it.

    Perhaps I’m speaking from a biased angle, as an aspiring astronautical engineer, but I don’t see your arguments coming true. Let’s hope they don’t in any case.