How do you deal with a compulsive liar in your life?

My best friend of 6 years is a compulsive liar and it is tearing me away from him. He lies about EVERYTHING!! I went to visit him in qld and I was staying at the Sofitel which is 5 star! He had to tell his friends I was at the Q1 resort and spa which is also 5 star, because he found the Sofitel was "older" therefore, more embarresing. SOOO annoying!! He lies about where he is, what he does, why he doesn't want to see me, just in general. I don't want to lose this friendship, he makes me smile everyday and makes me happy. It is purely the lying. My question is, do you or have you had one of these people in your life and how have you dealt with it?