Club Med will close its only Australian property, Queensland's Lindeman Island resort, in January.
Club Med Australia and New Zealand general manager Quentin Briard said it was an extremely difficult decision for Club Med to make, as the resort is a firm favourite with its Australian and New Zealand guests.
"But our on-going research shows that more and more, our guests want our new premium all-inclusive product, and Lindeman's three trident (three-star) status... was not in that category," Briard said in a statement.
"So in order to meet our customer's expectations, we have to now seek a new resort in Australia."
No forward bookings have been taken by Club Med after the proposed closure date of January 31, so no guests will be inconvenienced, he said.
French-based Club Med - or Club Mediterranee - is one of the world's most famous luxury holiday chains. It operates 80 all-inclusive resorts.
It aims to have over 65 per cent of its resorts worldwide in the upscale four to five trident category.
The resort chain said it would assist its Lindeman Island employees to find employment on neighbouring Whitsunday islands, while Club Med's international staff members will be relocated to other resorts around the world.
CBRE Hotels Qld have been appointed to sell the resort.