Replacement of whatever (necessarily small, otherwise the big city money wouldn't be a problem) industry there is/was with entertainment and tourism isn't the issue. The reality of an economy that is dependent on a specific image or perception (many would say facade) of quaintness is the problem.
You get all sorts of terrible "crab-bucket-esque" feedback loops that quash people's desire to do anything different, innovative or ambitious for fear of harming the golden goose. A large fraction of the people who actually want to do things (boring old normal business endavours that underpin a sustainable economy) leave because whatever their trade is doing it elsewhere and not putting up with all the extra overhead crap of doing it in a tourism/entertainment economy. The fact that a much larg(er than in a "normal economy) portion of the customers any given business sees will only ever transact with them ones creates a bunch of perverse incentives to do dishonest business.
It's like everything that's wrong with a college town combined with everything that's wrong with a wealthy retirement community.
Edit: strike CT from that list of examples, I was going for a "Cape cod but in the NYC economic region" and that part of CT is more like NYC's wealthy NJ suburbs.
It's somewhat received wisdom that those who can afford private schooling throughout their K-12 years leave the islands for labor opportunities (outside of tourism and real-estate management) in the lower 48 (the mainland). Meanwhile those who have to suffer through the Hawaii public education system are destined to do their part in entertaining wealthy mainlanders.
Extremely high land and input costs have long pushed many innovative/nascent businesses to the mainland. Consequently the jobs created by those firms are not available to people from Hawaii. I've heard of some promising new ventures that are seeking to change this, but I'm not holding my breath that this dynamic will change anytime soon.
Note: I apologize if I've casted shade upon anyone who's been through the Hawaii public education system and found a career that suits them.
COVID and the resulting remote work might actually be contributing to a better distribution of wealth in the country in general. It might depress salaries for industries that have concentrated in places like SFV and NYC, and thus create incentives to move out of those areas and create less drastic occupational concentrations in some industries. These changes will create conditions that create secondary benefits.
I think this is an under-appreciated fact. Remote work has the potential to be a huge equalizer, by uncoupling people's jobs from where they live.