While in most Mario games that feature extra lives, the object that grants them is a 1-Up Mushroom, in Hotel Mario, this object is supposed to be a Toad instead.
Top: the entry about Toad from the game's manual.
Middle: how Toad appears during gameplay (left side of image).
Bottom: all of Toad's sprites, extracted from the files.
The item appears as a cross between a regular type of mushroom as seen in Mario games, and a Blue Toad's head, which results in it resembling a faceless, severed Blue Toad head hopping around.
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Top: in Hotel Mario, a cutscene after completing the first hotel shows Roy Koopa grabbing Peach and escaping by running up a vertical wall. While this may seem like simply a cartoonish action, this actually references a real ability Roy has been shown to possess.
Bottom: in his battle in Super Mario World, Roy runs up the walls of his arena in the same manner.
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It's so funny that, in the Hotel Mario prototype, the "toasters" cutscene has had its audio completely obliterated by a stereo test that isn't even stereo.