Space tourism could provide the beginning of new business opportunities beyond simply selling spaceships and tickets. (credit: J. Foust)

General (Rocket) Motors

by Sam Dinkin
Monday, August 29, 2005

GMAC (formerly known as General Motors Acceptance Corporation) is worth about $15–20 billion according to one article. With GM trading at a market capitalization of $19 billion it might be time to break it up. At $420 per member, its health insurance plan alone is worth $450 million if it were sold. Overall, the top 18 carmakers sold $1.4 trillion worth of stuff last year, which is about two and a half percent of the world economy.

Where is the money going to be in the new world of discount rocket flight? Financing would be a good bet. What about insurance? Drivers in the US pay an average of $871 per year on insurance. With almost everyone over 16 years old a driver, that is about 80% of the US population, or revenue of $200 billion a year. Annual global oil consumption is about 80 million barrels a day, or $1.9 trillion a year, with gasoline accounting for about 44% of that.

If training for a spaceflight takes four days, that is four nights in a hotel room until there is a rocket at every airport. US hotel revenues were $113 billion. Four nights in a hotel would average $320. That’s not much compared to a $200,000 ticket, but if there are millions of fliers, it starts to add up. There might be a Las Vegas of rocket flight some day; even if 99% of the money is in rockets, there still might be a bunch of hotels nearby.

There might be a healthy market offering riders to cover rocket flights. If it is anything like airline trip insurance, it will be very profitable once rocket flight providers work the kinks out of their fulfillment.

Hotels and fuel for rockets might be well served by the existing infrastructure, but there needs to be new insurance work and new financing work. A firm with a rocket fleet might sell a lot more rides if it had its own financing arm. Right now, there are few people who can borrow $200,000 for a signature. There is no Sallie Mae or Fannie Mae for rocket flight loans. Vendor financing might work at the start, but there is an opening for a specialist in rocket loans. With a little lobbying work, a firm might be able to make it harder to discharge a rocket trip loan in a bankruptcy if it can be pitched as a once in a lifetime experience like getting an education. Vendors with surplus capacity can subsidize the loans the same way GMAC can offer 0% loans for cars.

Insurance is another opening. With some investment in contract language research, jurisdictions, a little lobbying, and some test marketing, there might be a healthy market offering riders to cover rocket flights. If it is anything like airline trip insurance, it will be very profitable once rocket flight providers work the kinks out of their fulfillment.

Sales should be big. Car dealers account for about $1,000 per car. My opinion (and I put my money where my mouth is here) is that in-house sales might not be the best choice. Six percent might not be a good commission for a house any more now that the house market is well understood, but a 6% commission for a $200,000 rocket flight experience probably makes good business sense, if not a 10% commission or higher. Time will tell which model becomes most prevalent. As utilization falls in the event supply starts to exceed demand at market prices, we should expect to see big sales incentives and more decentralization of the sales role.

There is going to be quite a business ecosystem developing around space tourism if it is going to become a multibillion- or trillion-dollar industry in 100 years. The field is pretty clear in all these arenas for someone to be first. That entails risk if the market does not materialize quickly, but also reward. Gentlemen, start your engines!

Sam Dinkin is a regular columnist for the Space Review and Founder and CEO of SpaceShot, Inc. He can be reached at dinkin@space-shot.com or 888-434-6546.

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