TUI AG (LON:TUI) shares dropped back another 3.23% on Tuesday as a four-star hotel in Tenerife was put on lock-down after confirmation of coronarvirus.

The hotel, H10 Costa Adeje Palace, is part of the highstreet travel agent’s all inclusive stable and it is the latest high-profile quarantine incident for holiday-makers – following on from the Diamond Princess cruise ship, and, yesterday travel warnings for Italy.

It comes after an Italian doctor, from the Lombardy region, at the hotel tested positive for coronavirus.

Media reports claim up to 1,000 tourists – some of which are British – are being confined to the Canary Island hotel and are due to undergo testing for the virus.

TUI is just one of many travel companies that sell holidays to the Tenerife resorts. The timing of the outbreak may prove particularly worrying for investors in TUI and other travel stocks as such incidents may cause hesitation for new bookings.

Earlier this month, City analysts described themselves as “encouraged” by favourable booking trends alongside progress in the cruise and hotel divisions.

In London, TUI shares fell more than 3% to change hands at 742.2p on Tuesday adding to Monday’s losses. The holiday share is down 12% in the week to date.

Easyjet and budget airlines fire warning shots

On Monday, Shares in the international and budget airlines were left grounded by fears the coronavirus outbreak is morphing into a pandemic threat to travel.

Worst affected was easyJet Plc (LON:EZJ), which saw 11.4%, or £680mln wiped from its value yesterday after Italy went into lock-down mode as it tried to contain the spread of the flu-like illness.

With 152 cases, it is the worst affected country in the EU, though there are reports that neighbours such as Austria may be ready to close their borders.

Italy itself is responsible 9% of air travel in the European Economic Area – in other words it is an important destination for the low-cost firms already grappling with fleet problems associated with Boeing’s 737 Max.

Easyjet, Ryanair Holdings plc (LON:RYA), Wizz Air Holdings Plc (LON:WIZZ), and cruise giant Carnival Plc (LON:CCL) were also seeing their shares fall again on Tuesday – sliding 2.2%, 2%, 0.49% and 5.45% respectively.