Translation:This room is small.
Okay, thanks, because I was confused what the difference was between this and 小さい ...
I don't know if this is the case, but maybe "narrow" is the common term used in Japanese to indicate a lack of spaciousness in a room? And since I would never refer to a small room as "narrow" (unless it was long and narrow, but then it wouldn't be small per se), Duolingo suggests "small" as the natural translation. It should still accept "narrow" as an answer, though.
I agree with this interpretation. せまい can be used to mean narrow, like ひろい can be used to mean broad, but when referring to a space they mean something more like "cramped" and "spacious" (though I don't think they're quite the same either. There isn't really a one to one translation here).
せまい does mean narrow, but when you use it for a building or room it can also be translated as small.
And the narrowest of them all are those capsule hotels / rental rooms in tokyo, barely enough space to lie down and have some luggage beside you