It is understood Mr Nicolaou, who was until recently executive chairman of NSW Liberal Party's main fundraising body, the Millennium Forum, resigned from the AHA on Wednesday morning, with the decision effective on Thursday.

Mr Nicolaou has been on leave since April 24, following his appearance at the Independent Commission Against Corruption, during which he was questioned about lobbying on behalf of Australian Water Holdings - a company linked to the family of disgraced former Labor minister Eddie Obeid.

During public hearings, Mr Nicolaou was grilled about an email revealing he had negotiated a meeting between then Brisbane lord mayor Campbell Newman and AWH chief executive Nick Di Girolamo in 2007 in return for a $5000 donation to Mr Newman's re-election fund.

The ICAC heard that in 2010 Mr Nicolaou sought to smear the reputation of respected businesswoman Kerry Schott - then chief executive of the Sydney Water Corporation, with which AWH was in dispute - by writing to radio host Alan Jones and labelling her a "base corrupt criminal". He agreed with the commission he had no basis upon which to make the claims.

Mr Nicolaou has also been accused at the ICAC of using the Millennium Forum to help funnel illegal political donations, including from property developers, into the Liberal Party's 2011 state election campaign by passing them through another Liberal-linked entity, the Free Enterprise Foundation.

This is expected to be further explored in the next round of hearings in the current ICAC inquiry, Operation Spicer, due to resume on Wednesday next week. It is likely Mr Nicolaou will be called to give evidence.

Mr Nicolaou's resignation comes just over two years since his appointment as NSW AHA chief executive. It follows what is understood to be significant disquiet amongst senior hoteliers over his involvement in the ICAC investigations. John Whelan has been acting chief executive.

Before joining the AHA, Mr Nicolaou - who in 2003 unsuccessfully contested the state seat of Ryde for the Liberal Party - was managing director of the political lobbying firm Premier State, owned and run by former NSW minister Michael Photios.

Mr Nicolaou ran the Millennium Forum - the NSW Liberal Party's main fundraising arm - for more than 10 years before his resignation in late April, following evidence at the ICAC.

On Saturday, Fairfax Media revealed the NSW Liberal Party has decided to shut down the discredited Millennium Forum but has established a new body, the Federal Forum, to solicit political donations for federal election campaigns.

During the Liberal Party state council on Saturday, it emerged that the ongoing ICAC hearings were taking a toll on the party's finances due to mounting legal expenses and a drop in donations.