Uncertainty and the Tourism Industry: Nonlinearity, Asymmetries, and Implications

Abstract

This study investigates the asymmetric effects of pandemic-induced uncertainty on tourism demand from Western Europe to the United States of America, offering a novel perspective within the framework of business-cycle theory. Traditional models typically assume a symmetric impact of external shocks, such as pandemics, on tourism demand; however, this study challenges that assumption. According to business-cycle theory, cyclical fluctuations during both expansion and contraction phases exhibit asymmetric effects. This research applies this theory to explore how pandemic-induced uncertainty affects tourism demand, using a non-linear approach. Our findings demonstrate that the positive impact of uncertainty reduction (contraction phase) on tourism demand is greater than the negative impact of increased uncertainty (expansion phase). The study highlights the importance of incorporating nonlinearity and asymmetry when analyzing tourism demand, particularly in the context of global crises and uncertainties.