In the novel, a character known as Horace Derwent has "poured millions" into restoring the Outlook Hotel, the location of the movie. It is explained that Derwent is bisexual, and a younger man has a crush on him. In a scene set in 1921, the young man is acting like a dog to amuse members of a party, and Derwent says that "'maybe', if the young man dresses like a nice doggy, and acts like a nice doggy, he 'may' be willing to sleep with him".
The upshot of this is that Wendy, a central character in the story, comes across the two in a bedroom as ghosts in both the novel and the film. The young man is dressed in a dog suit (although in the film it looks more like a bear suit, with a hole cut out of the bottom), and appears to be performing oral sex on Derwent. This scene was included in the film without the set-up as prior explanation, resulting in much confusion over its significance for those who had not read the novel.