It all started in Vegas, claims Scott Barber, general manager of Harrah's Atlantic City and a hotel-industry veteran. There, pools cool down the leisure traveler by day, entertain the conventioneers at night, and, increasingly, change into nightclubs in the wee hours. Revenues have been climbing so steeply at its hotel pools, says MGM Grand, that its eponymous property in Vegas just introduced a "Wet Republic" nightclub-style party in the afternoon, complete with velvet rope.

The success of the pool-party phenomenon prompted Harrah's Resorts to open an 86,000-gallon domed indoor pool/bar last year in Atlantic City, New Jersey. So far, revenues have "exceeded our wildest expectations," says Barber, with attendance as high as 2,600 people a day. Guests are paying several hundred dollars per day to rent out not only cabanas but also hot tubs and outdoor "private V.I.P. rooms" shrouded by foliage. And while guests who come to gamble expect discounts, pool fans pay full freight, he says, and even pay extra for the possibility of swimming near celebs. "We'll get about $1,500 [per cabana] when there's a Carmen Electra" in the house.

They also get some disappointed kids: The pool is adults only (Harrah's has another upstairs), a trend that has taken hold industrywide. High-paying business travelers don't want telltale splashing and giggles in the background of their voice-conferencing.

In general, the hotel industry doesn't break out pool spending separately. But the Carlson Group, a Chicago-based owner of a fleet of hotel brands including Regent Hotels and Country Inn & Suites, is spending $6 million of its $53 million Radisson St. Martin renovation budget on a "big and sexy" pool, says general manager Jeff Lesker. "The American market craves large swimming pools on vacation." Indeed, while people say they come to the Caribbean for the beach, he notes, they tend to hang out by the pool. So the new one is being redesigned to look like it flows directly into the sand, so people "can feel they are on the beach"—without actually having to go.

Hotel pools have been getting bigger—and fancier—for roughly the last 10 years. A high-design building boom kicked off the sector’s growth in the 1990's (think infinity edges), then, when a harsh travel downturn hit in 2001, many hotels opted to rebrand themselves as "resorts" by adding whirlpools, waterslides, and, later, luxury cabanas.

In the past few years, the biggest trend has been to add hotel pools in metropolitan areas. Since 2002, at least seven new ones have opened in New York, including the Marriot Courtyard Upper East Side, the neighborhood's first hotel with a lap pool and whirlpool. But as innovations and amenities are copied throughout the industry, it's gotten harder to impress, creating a cycle of upgrades. A ripple effect, indeed.