The legionella bacteria is found in mist from contaminated water
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More than 500 hotel guests have been contacted by health bosses in North Somerset after two guests contracted Legionnaires' disease.
Anyone who stayed at the Grand Atlantic Hotel two weeks before it closed on 10 November is being sent a letter.
A North Somerset Council spokesman said the hotel in Weston-super-Mare was carrying-out a thorough disinfection.
"Management is co-operating fully. It will only re-open once we are satisfied the legionella has gone," he said.
He said the bacteria had been identified in water samples from the hotel and the council is working with the Health Protection Agency (HPA) to deal with the outbreak.
Risk 'low'
He added: "Legionnaires' disease can be a serious infection for older people, so it's important that any cases are thoroughly investigated to find any potential source.
"Working alongside the HPA, we've been able to establish that there is a link between these two cases and the Grand Atlantic. Initial water samples have shown there is a problem with legionella bacteria there."
HPA South West said the risk of infection to hotel guests was "low", but that it was important they were aware of the signs and symptoms of this disease.
"If they are concerned, they should contact their GP, or us," a spokeswoman said.
The hotel management agreed to close the premises on Friday, 10 November.