Rather than stashing spare towels in a closet or cabinet, dig them out and use them as decorating accessories in the bathroom. One idea: fold towels of any size as you usually do but then roll them from end to end to form tubes. Tuck the rolled towels in a great-looking basket or crate and place them in the bathroom. Hand towels can be displayed on top of the counter. Bath towels can go in a larger container on the floor.
For extra oomph, you can even add dried flowers to the arrangement.