The other side shows some damage, too. ive had it covered for about 3-4 years. It isn't wet or hasnt worsneed. The laundry room with drop ceiling is below. There is no sign of a leak.

This bathroom was remodeled 6 years ago. A young lady cleaned for us for the first four years. Because I didn't do the cleaning at that time, I didn't notice it until the damage was done.

Rather repair the drywall and risk this happen again, I'd like to find an aesthetic way to address it.

No matter what you will get water on the wall a shower curtain does not work to keep water in the shower you need an actual glass door on that shower . You need to amlke sure that wall is also water proofed if you insist on using a shower curtain.

I would not tile all the way to the ceiling. I would do a single tow of 4" tile around the entire shower stall.

This is such a minor drywall repair, I’d rather repair the drywall in a quarter of the time it will take you to do all that tiling.

Repair drywall and get a shower door to avoid constant drywall repairs...

Having a shower curtain there you will have water drips and splash-overs all the time.

It could just be that moisture from the shower runs down on the shower curtain and causes this problem .. ? Just repair the wall...and get a glass door . I wouldn't tile all around . Should be an easy fix .

Agree with others that it looks like it is from a little water leakage from the shower. I had bad damage from the same thing in a rental and it was totally remedied by getting a glass door. If you are adverse to that I’d suggest a shower splash guard such as the one I have linked to, below.

https://www.bedbathandbeyond.com/store/product/tidee-tubb-ultra-clear-shield/1015058943?skuId=15058943&gclsrc=aw.ds&&enginename=google&mcid=PS_googlepla_nonbrand_baby_online&product_id=15058943&adtype=pla&product_channel=online&adpos=1o3&creative=224283462376&device=t&matchtype=&network=g&mrkgadid=3245666115&mrkgcl=609&rkg_id=0&gclid=EAIaIQobChMIkq_UhsXU5AIVARx9Ch2ocg1dEAQYAyABEgKatfD_BwE

Is there an exhaust fan being run during the entire time the shower is in use, and is it continuing to run long enough post-shower to deal with the moisture issue associated with all showering? Without that fan, and not letting it continue to run for a good while, your shower curtain (which will have moisture collected on it after using the shower, no matter what) and the walls surrounding the shower, are going to have moisture on the surfaces quite a while and that is likely going to cause drywall damage. Without a proper moisture barrier put in place, drywall that is 'moisture resistant' isn't going to 'resist' for long.

We had a tile surround put in with the porcelain/cast iron tub that was installed roughly 5 years after I moved into our previous residence - a SoCal townhouse - with frame-less glass doors. Though the wall area right outside of the tub was more or less protected by the row of tile put up outside the doors and went down to the floor, it was the wall area above where the tile surround ended up to the ceiling that *wasn't* protected that we worried about. If I could go back and do it over, I'd have the tile go all the way up to the ceiling. There also wasn't an exhaust fan, so I ended up buying a small portable fan and running it with the window open throughout the time the shower was running, along with keeping the fan going for at least an hour afterwards. That, plus wiping off the wall(s) part where there was no tile along with the ceiling, kept the drywall from falling apart (same for the ceiling!) after a decade of long showers.

I appreciate all of the feedback. The area does not continue to get wet. The area has been covered to help determine if this is an ongoing issue. It has not worsened from behind the wall or from the shower -

It hasn't changed over the past 3-4 years.

There is a liner behind the shower curtain that was hemmed to reach the floor of the shower. I am certain that the young lady who cleaned used the shower head to rinse and didn't realize this was happening. Probably thought it was from showering.

The shower is not wide enough for a door.

This house is 46 years old. Between the ceiling fan and hot air heat/airconditioniing in the room, moisture is not an issue. The wall can be repaired though I'd rather make these areas impervious for that just-in-case time. A one-time cost is not a concern. I just don't want to revisit this at a later time

Is there an asthetically pleasing way to to treat the area other than tile? Or use tile in a more artistic way?

The shower is not wide enough for a door.

Double check that. Stock shower doors are available to fit openings only 23.5" wide.

https://www.homedepot.com/p/24-in-x-64-in-Framed-Pivot-Shower-Door-Kit-in-Silver-with-Pebbled-Glass-SDKIT24-SIL-R/203906452

If you opt for a tile “solution,” after repairing the drywall...use a plain white tile. Not the same floor tile. Something that will continue the color of the fiberglass surround.

That's one tiny shower door. But I do see a Sterling 42" which is what we have. I'll show this to my hubby but think the commode will prohibit a hinged door.

i agree, ptreckel. A solid tile would blend better than the speckled.

Could water be trickling downhill along the tub edge and touching the wall over time? That would lead to spreading out slowly without ever looking "wet."

Two years ago, so I'm certain they have solved the issue by now.