Gleneany House Restaurant and Guesthouse, Port Road, Letterkenny, is the latest Donegal business to fall victim to the harsh financial climate.
Owner Paul Kelly said yesterday that it was "no longer economically possible to remain open."
Mr Kelly's full statement read: "Today is a very sad day for the entire Kelly family and for me personally, as Gleneany House has been a major part of my life for almost 20 years. However, due to very tough trading times, it is no longer economically possible to remain open.
"I would like to thank everyone for supporting us down through the years - our customers, our suppliers and most importantly our loyal committed and hard-working staff past and present."
Mr Kelly's father, Joe, who is originally from Mountcharles, bought the premises which was an electrical store, and converted it to a hotel and restaurant. The family also operate another hotel, the four-star Airport Manor Hotel in Dublin. Their main business, though, is in car sales, with large Toyota dealerships in both Mountcharles and Letterkenny.
The President of Letterkenny Chamber of Commerce, Patrick McGinley, expressed surprise at the news. "I'm genuinely shocked to hear this. Gleneany House has been there, a very successful business, for as long as I can remember. The hotel was perfectly located in the centre of town, with very well-appointed and reasonably-priced rooms. The food was also very good and Gleneany House enjoyed a flourishing lunchtime trade. I think it says a lot about how difficult times are for traders that a successful family like the Kellys would have to take the difficult decision to close.
"A business like this is important to our town and I would sincerely hope that someone will be in a position to re-open Gleneany House when things improve."
Letterkenny Mayor Tadhg Culbert called the closure "a very sad event". He said yesterday: "Gleneany House was well-established over many years, providing excellent accommodation and quality food. The business provided local employment both directly and through suppliers. It is a very sad event to see the closure of a business of that high calibre, especially at this time of year.
"From a commercial and tourism point of view, Letterkenny needs quality accommodation like that provided at Gleneany House. I would very much hope that someone will take over the business and re-open it as soon as possible. I would like to wish Paul and his family well for the future and thank them for their contribution to the success of Letterkenny over the years," he commented.
Another popular Donegal hotel, the Ostan na Rosann in Dungloe, remains on the market after closing just over a year ago.