The UK Health Security Agency confirmed that cases of cryptosporidiosis in the Brixham area had more than doubled from 22 to 46, with more than 100 others reporting symptoms of the disease.
About 16,000 households and businesses in the Brixham area have been told by South West Water (SWW) not to drink tap water without boiling and cooling it first.
Residents and visitors have reported falling ill and business owners spoke of their deep concern that one of their busiest times - the half-term break at the end of this month-could be ruined.
Carrie Toms, 46, the head of bookings at Harbour View guest house, said: "It has affected business, people have been very concerned about it. We've had a few cancellations."
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