The 21-year-old footballer died falling off a balcony on holiday. His godmother Karen Baker, of Hertfordshire, secretly arranged for a heartfelt tribute in the hotel room.
But instead, her friends were disgusted to find a life-size model made out of clothes lying on the hotel bed, holding a birthday cake.
The haunting tribute was complete with a can of lager and tears on its face.
The body was lying next to petals arranged to read: "We miss you Alex".
Mrs Baker, who first discovered the mannequin, said she was "utterly horrified" and managed to remove the dummy before Alex's parents saw it.
She told the BBC: "Staff had gone through my friend's wardrobe and stuffed the clothes with towels to make it look like a body on the bed. They even put tears down the face and a can of lager in his hand.
"I was absolutely horrified - as you can imagine I was sweating and shaking. We just didn't want our friends to see it.
"I have truly never seen anything like it. I still look at the photographs now and can't believe somebody thought to do that".
Red-faced TUI has since apologised for the "misunderstanding".
Alex Stephens, from Willesden, north-west London, died after flying to Barcelona with friends for a music festival in 2014.
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