Abstract
The economic effects of tourism industry during periods of crisis, such as the COVID-19 pandemic, have received significant attention in recent years. The future is likely to pose a range of new challenges and opportunities to sustainable tourism. This paper employs the Markov-switching vector autoregressions (MSVAR) model to investigate the sustainability of tourism’s economic effects in Hong Kong, both during periods of crisis and in the absence of crises. The empirical results show that: (1) The MSVAR model is effective in capturing the nonlinear relationship between the economy and tourism and allows for the categorizing of this relationship into four regimes, for example, the “major event crises” regime and the “economic crises” regime; (2) The economic effects of tourism differ noticeably across the four different regimes, and sustainability varies depending on the presence and type of crisis; (3) The Hong Kong economy, and the tourism industry in particular, exhibits high levels of stability and sustainability. In short, economic growth in Hong Kong’s tourism industry is capable of rapid recovery following major crisis events, and it has the capacity to rebound quickly into new periods of rapid growth.