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Restaurants run by chef Damian Clisby will also lose their rosettes.
The hotel, a feature of the beautiful market town of Chipping Campden in the heart of the Cotswolds, is popular with visitors from all over the UK, as well as international tourists from countries including the USA and Japan.
General Manager, Duncan Fraser said: "The decision was extremely difficult to make – we have the utmost respect for the AA and how it represents our industry – but we feel that for very quirky and unusual properties like Cotswold House Hotel & Spa, it can be slightly confusing for guests.
"They tell us that when searching for a hotel that doesn't fit a particular mould, such as ours, they find resources such as TripAdvisor, Great Hotels of the World and Small Luxury Hotels of the World, give a clearer understanding of the individual style, and quality of the property."
Fraser added: "In fact our sister hotel, the Noel Arms, also in Chipping Campden, just across the road from the Cotswold House Hotel & Spa, will continue to be rated by the AA, as we feel happy that the model works well for this kind of hotel.
"We are saddened by the fact that Cotswold House leaving the AA means that we have to relinquish the rosettes awarded to our two restaurants: Hicks Brasserie and Juliana's. Unfortunately we aren't allowed to retain the restaurant ratings independently of the hotel.
"However, the restaurants are so popular with local people as well as in-house guests that revenues should not be adversely affected, especially since Damian Clisby has joined us as executive head chef.
"Under him, and the rest of the kitchen staff, our food goes from strength to strength."
Clisby has made it clear that he is fully committed to maintaining and enhancing the standard of the restaurants in his charge.
He commented: "The kitchen staff here already produces food that is a match for the top London hotels, and I believe we have the talent to take the eating experience we offer to new heights."
Damian trained under Anthony Demetre at Putney Bridge, and for a time was head chef at Rivington Grill Restaurants in Shoreditch and Greenwich, owned by Caprice Holdings.
There he worked alongside Mark Hix before moving to Langar Hall Country House Hotel in Nottinghamshire, as head chef. He has also cooked at the two Michelin-starred Pied a Terre, J Sheekey, and Thyme Restaurant in Clapham. Before moving to the Cotswold House Hotel he was executive chef at FJB Haven Hotel, in Sandbanks, near Poole.
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