There would need to be some serious levels of construction to get the Watering Hole to become the bar we want it to be. Right now it's just a counter service location that happens to have booze; what it needs to go to is something more aiken to Backwater. This might seem trivial but a lot of demo and remodeling would be needed to add the new bar equipment they'd need (washing stations, glass storage, liquor bottle storage/well, mixing areas, etc).
Personally, I think it'd be worth it for Universal to just demo the whole area, push the bar to the left towards Hogsmeade and add more storage for mugs, liquor, etc. Add a new patio that goes towards the new coaster, almost like a treehouse vibe with large palms sticking through the deck.