We had a 4-days-stay at the Blue Water at the end of our 4-weeks travel throughout Sri Lanka. Overall, we would recommend The Blue Water as it's a beautiful and well-designed hotel with very welcoming, friendly and helpful staff, a wonderful pool area, a great view on the with palm trees lined beach (the sunsets were amazing!) - though we only rate it 4/5. Reasons:
1. Food was mediocre, especially the adaptions of European / Western dishes were not adequate. The local dishes were better, but had been way better (and a lot cheaper) almost everywhere else we've been to in Sri Lanka.
2. There are some places where the hotel is in need of renovations (e.g. balcony railing, bathrooms / toilets at ground floor). In fact, at the time of our stay there were a few construction sites.
3. There were a lot of ravens at the hotel / poolside, that seemed to be resident there and made quite some noise. There were a lot of squirrels too (which we would count as a pro as they were very entertaining).
4. Location in a larger scale: The beach was clean, but you could barely go into the water (winds, currents) just like at most beaches at Sri Lanka' s west coast. Wadduwa itself offers nothing worth to visit or spend time at.
All the above reasons have to be regarded in relation to the quite high prices. Especially the food was a deal-breaker for us.
In all honesty, we still would recommend The Blue Water to friends, but wouldn't stay there again ourselves but rather try something new.