The Chateau Tongariro will be permanently closing this Sunday following weeks of mystery regarding its future.

It comes as the hotel was set to renew its 30-year lease with the Department of Conservation (DOC).

The chateau's 30-year lease expired in April 2020, and the building owner, Kah New Zealand, had been negotiating with the Crown to determine its future.

To prepare for the new lease, the hotel underwent detailed site and seismic assessments with the help of third-party specialists - to ensure it could be renovated.

However, following these assessments, it was found that underground shifts meant some of the hotel's infrastructure no longer met safety standards, leading to the closure.

"This is a very sad day for our hotel family," Kevin Peeris, the senior vice-president of commercial of the Chateau Tongariro Hotel's parent company, said.

"Bayview International Hotels and Resorts has destinations in Asia, Australia and New Zealand, and without a doubt, Chateau Tongariro Hotel is a flagship hotel and has been an iconic destination for international and local visitors."

A spokesperson for the hotel said the decision was also influenced by the cost of ensuring site safety from long-term seismic risk, Ruapehu Alpine Lifts falling into voluntary administration, the uncertainty of the mountains ski resort, poor snow season conditions and pandemic restriction.

Thirty-six of the hotel's staff will be directly impacted by the closure and are being supported through the transition.

Ruapehu Mayor Winston Kirton said the hotel's closure was a "significant blow" to the region's tourism economy.

"Council is saddened by the news and thank KAH New Zealand for their commitment to the region and operating this iconic hotel for more than 30 years. The chateau has been iconic part of Ruapehu tourism since its opening in August 1929," he said.

"It has overcome periods of uncertainty over its future in the past, and we can only hope that it will continue to have a long future as part of the world heritage Tongariro National Park."

The mayor has been talking with the Ministry of Social Development, which will be implementing a redeployment response to support affected staff.

In a statement, DOC's operations manager for Tongariro George Taylor thanked the hotel's parent company for their commitment to the region.

"DOC thanks KAH New Zealand for their commitment to the region and operating this iconic hotel for more than 30 years and supports their decision.

"KAH New Zealand will work closely with DOC over the coming weeks during the transition."

The chateau was built in 1929 and was in operation for nearly 100 years.