Fear of an eruption has forced authorities to order evacuation of 40,000 people from the volcano's foothills.
It has also forced the temporary closure of Bali's main airport.
Tourism numbers have gone down since the volcano began rumbling in September.
We are very well prepared but we do need to worry about the long-term impact on the lives of the evacuees and the impact on tourism to Bali. That's the more serious issue said Bali's Governor, Made Pastika.
The Bali Tourism Board has set up a crisis centre to respond to the eruption.
It is co-ordinating free accommodation for 2,315 stranded travellers, and it has set up consular and immigration desks at the airport to help tourists to make arrangements to stay longer.
In the island's south, where the bulk of foreign tourists head, the volcano's impact is not immediately apparent.
The sun is shining very brightly in Bali's south today, said Gilda Lim Sagrado, a spokeswoman for the Bali Tourism Board.
However, the Tourism Board has indicated that visitor numbers are down since Mount Agung's volcanic tremors began to increase in September.
A 2015 forecast by the World Travel and Tourism Council estimated that tourism would make up 3.2% of Indonesia's economy by 2025.
In Bali, which drew more than 4.5 million tourists in the first nine months of 2017, tourism makes up a much larger slice of the economy.
Before the volcano started rumbling, the island appeared to be on course to have at least 5 million arrivals in 2017, beating last year's total.
An eruption would almost certainly have an impact on the airline industry too.
Bali's airport has been closed for more than 24 hours, disrupting 445 flights and roughly 59,000 passengers.
The situation is being reviewed every six hours by the aviation authorities.
When flights resume, there is likely to be a backlog of passengers, which airlines might take a week or more to clear.
Mr Taylor said the airlines are insured for events like this, but it is not likely to cover all their costs.
Eruptions that cause lasting effects can impose huge costs on airlines.
The International Air Transport Association estimated that global airlines lost about $1.7bn of revenue as a result of the disruptions caused by the eruption of Mt Eyjafjallajokull in Iceland in 2010.
Airlines avoid flying when volcanic ash is in the air because it can damage planes' engines.
In June 1982, ash caused all four engines of a British Airways 747 to shut down after the plane flew through ash from Mount Galunggung in Indonesia.
It was able to restart three of the engines and land at Jakarta.
Indonesian officials have shut the international airport in Bali for a second day, as Mount Agung spews volcanic ash into the atmosphere.
Massive blooms of dark ash were seen reaching as high as 3km (2 miles) above the summit of the rumbling volcano, which began erupting last week.
Officials raised the alert to the highest level on Monday, fearing an imminent major eruption.
Up to 100,000 people have been ordered to evacuate the vicinity.
Volcanic ash can damage aeroplane engines or even cause them to fail, and also clogs fuel and cooling systems. Pilot visibility can also be hampered.
The Transportation Ministry initially closed the Ngurah Rai (Denpasar) airport on Monday morning for 24 hours, cancelling more than 400 flights and stranding 59,000 travellers.
On Tuesday, they announced they would extend the closure to Wednesday 07:00 local time (00:00 GMT).
Sutopo Purwo Nugroho, spokesman for Indonesia's national disaster agency, said that the ash was being drawn southwest - towards Bali's main airport - by a tropical cyclone in the Indian Ocean.
The airport on neighbouring Lombok island however has been re-opened, he added. Authorities have also arranged for buses to take tourists to ferry terminals.
The volcano is about 70km from the popular tourist areas of Kuta and Seminyak.
The disaster agency said in a separate statement said that as of Tuesday morning, the volcano was still emitting thick ash clouds and that rays of flares from the glowing lava were also observed overnight.
Besides ash, streams of rock mixed with water known as lahar have also been spotted flowing down from the mountain. Officials have warned people to stay away from them.
Officials have told everyone living in a 10km exclusion zone around the volcano to evacuate.
Mr Sutopo said that officials faced difficulties estimating the exact number of evacuees given varying population data, but they believe between 90,000 and 100,000 people needed to leave.
So far, only 29,000 people had moved to shelters, while others have fled to other places like Lombok, he said.
There are many people who have remained, as some still feel safe while others are unwilling to leave their cattle and fields.
Authorities have warned that they may forcibly evacuate people if they do not move to shelters soon.
A large banner says You're entering active volcanic hazard zone. But looking around, you wouldn't know.
The volcano has been rumbling for weeks now.
Authorities say they will force people to evacuate. But those on the mountain still resist evacuation for there own safety.
Tourism Observer
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