Place a standing coat rack in an unused corner or behind a door, and you have a place where you can hang several towels. This frees up your wall space for a mirror or another accessory.
One place to hang towels in your small bathroom without taking up extra room is from the shower-curtain rod. If you have several towels, use plastic clothes hangers. These hangers come in several colors, so pick one that complements your bathroom. When someone needs to use the shower, temporarily move the towels to another place in the bathroom.
A towel rack does not need to be installed in the middle of a wall. If you have space under the bathroom window that is not being used, install a towel rack there. As this is a space that isn't usually used for anything, your towels will be out of the way.
Install two or three hooks on on the back of your bathroom door, and you have a neat, out-of-the-way place to hang your towels.