Owner Vista Hotels, which also owns the Fermain Valley Hotel and the Braye Beach Hotel in Alderney, wants to refurbish the property and create 17 units of accommodation.
The outside of the building will remain unchanged, although there are plans to demolish several outbuildings and sheds.
The advocates representing Vista Hotels, Mourant Ozannes, face the challenge of convincing the department that it should no longer be tourist accommodation.
In the planning application they state their case as to why it is unviable for the owners to continue to use it for that.
The area surrounding the building is a site of nature conservation importance.
Vista Hotels purchased the property in July 2010 for £1.8m.
At this time the company intended to run it as a hotel as an alternative to the Fermain Valley Hotel for their customers.
It remained open until the end of the following year, ceasing trading on 1 January 2012.
After consultation costing £111,000, it was determined that it would cost a further £6.79m to bring Le Chalet back up to its former three-star standard.
