The OP's interpretation was gross but otherwise how else could there be a child with a dog's head?
Actually that was explained at the very beginning of the film when the girl read the book - the same that she threw out of the car at the end. According to the book, a pregnant woman should not kill any living things or otherwise something terrible would happen to her baby. (It mentioned the example of a pregnant woman who killed a chicken and her child was born with missing fingers). The hotel owner's wife killed many dogs and presumably she was "punished" by some "dog demon" and so her child had a dog face.
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