They left behind a building filled with everything but life. It's a spooky sight, despite fresh plans to rejuvenate and reopen this grand old darl of the Blue Mountains. Workmen's boots and an abandoned Santa hat lie on the floor by a vending machine; aprons hang in the kitchen ready for service.

"Walking around an empty hotel is an eerie feeling, it's like being in a theatre with no actors," a heritage consultant, Jonathan Bryant, says. "It's like a scene out of The Shining."

We're not expecting a wave of blood to wash down Cats' Alley, where ladies once sat on sofas to critique passers-by, but you get what he means. "Some places are like people: some shine and some don't," according to Kubrick's 1980 film.

And the Hydro Majestic surely did shine, opening on the escarpment at Medlow Bath during a snowstorm in 1904 and boasting electric lighting four days before Sydney (a power failure on opening night left 200 guests huddling under blankets in the casino).

The Hydro's history is one of bright shining lights and false dawns. It's a palimpsest of the past century, with all its missteps and marvels.

The Hydro began life as a hydropathic spa, offering "bowel kneading, enemas and basting in mustard and chilli paste". Soon it was rebranded as a luxury tourist retreat, with clay pigeon shooting and cross-dressing costume parties. It was reinvented in the 1920s as a family hotel "for just ordinary folk", then in the 1940s as a military hospital. By the 1980s it was an albatross around the neck of the Blue Mountains, according to the local mayor.

In 2008, the old bird was put out of her misery by new owners, a group of Sydney investors, led by George Saad and Huong Nguyen, who also own and operate local hotels Echoes and Lilianfels. The former occupants took little with them when they locked the doors.

The Hydro was initially due to reopen in 2010 and then 2012. Now work on a $55 million, five-year redevelopment will start early this year. "It is probably one of the most famous, largest, most complex landmark resorts in the country, so you've got to get it right," Bryant says.

He takes us through the hotel's hodge-podge of buildings, which were tacked on in a largely ad hoc fashion over the decades. They stretch 1.1 kilometres across the escarpment.

In an old foyer, mattresses are stacked vertically by lines of white lampshades. An abandoned bain marie – could there be a sadder sight? – sits in the Megalong Room, which looks out over the valley.

"When I was a child this was the main lobby. It had an air of faded gentility. They would do a very glamorous Sunday roast where all the chefs would be hand-carving meat onto silver platters," Bryant says.

We cross to the casino room, where a mural depicts magicians, dancing ladies and dogs jumping through flaming hoops. A Christmas bauble collects dust on the wood floor. The casino hosted balls and concerts. But Bryant recalls when it was later filled with pinball machines. Many Sydney people have a similarly personal connection to the Hydro. But which Hydro? The health spa, the luxury resort, the family hotel or the stopover for doughy scones and canned cream? Sorting through the layers is a challenge, Bryant says.

"It's about trying to strip back some of the most unattractive and insignificant parts of the building to reveal its beauty again," he says. "The best approach with heritage is to peel back all the non-original parts, retain the original parts and build a fresh new layer," he says.

"It should be very clear to somebody that this is original and this is new, even though they're sympathetic. It's not about Disneyland where the line between fantasy and the real thing is blurred."

Behind every door is a dusty treasure. Buried in a makeshift office behind cheap walls lies the original intact candy-pole plaster verandah that once ran along the front of the hotel. Worn patches on the wood floor of the nearby billiard room, which will be converted into a tea salon, reveal where men once played the tables.

Their wives would wait for them in the adjoining Cats' Alley, a long walkway once lined with paintings of Roman warriors and men hunting wild beasties.

Those paintings are now stacked in a storeroom, alongside waiter uniforms, menus boasting such treats as sardine salad, and a porcelain toothpaste container. Next door is an old steam chamber and electric light box, which was somehow meant to re-energise the flesh.

It took three years to catalogue the thousands of items left behind in the hotel. Project manager Drenka Andjelic, of Construction Assignments, says many of the necessary structural repairs were completed by the Hydro's previous owners. "The building is actually in really good nick . . . we've got the easy part now."

The first stage of this year's renovation will focus on public spaces, such as the casino and billiard room. Rejuvenating guests' rooms could take three to five years to complete, Andjelic says, and some buildings beyond repair will be demolished.

Bryant takes us into a fibro building that once housed the hotel's cheapest rooms. It stinks of muck and urine, there are holes in the walls and ceiling, and crumbling boxes of documents.

We have come here via the ballroom, with its high ceiling and ornate turns. It will soon host weddings and functions for generations unused to such grandeur. Whether they will embrace it so fondly as their elders, time will tell.