97 year old mother having hallucinations. Is this just another stage of the disease?

There sure is no one answer on all this. So many kinds of dementia, and often not fully diagnosed until after death. Often medications for hallucinations make other things worse; for instance may help with hallucinations but cause more dizziness and falls.
Has there been any description via your doctor of what type of dementia Mom has? There are often some hallucinations with Parkinsons that can be sort of a paranoid type thing such as "He is having an affair with her and I know it" when someone comes in. Lewy's which my brother has (by symptoms dx, as it takes a brain biopsy to know it for certain) often causes one to see the world differently and often is aware of that. Wavy lines in carpets, in marble can make the whole world tip and go wavy. But the nighttime visitations can be absolutely remarkable and elaborate with him somehow aware they are not be real. Here is one: "There is a pool party outside my bedroom window when I come back from going to pee. The people are remarkable. A man with a towel over his shoulder, deeply tanned, white suit, Elvis Presley like hair. There is meanwhile, in my bedroom, a woman huddled with her child. When I reach out to her to comfort her she goes poof into thin air.
He sees things as different when out in the world: " a wheel and fender and hubcap looking like a woman in a white robe, bent over weeding; and I know that isn't right, but have to work backward from how I see it to know it is the van wheel fender and hubcap".
So hallucinations can be remarkable, and very varied. Oliver Sacks before he died had some amazing writings on the brain when it is impaired.
I would say keep an eye for a bit, gather what info you can, visit the doctor, and be as descriptive as you are able. They may then know of a medication to at least try, but do know side effects can be a bug with medications.
And as everyone warns on the forum CHECK FOR A UTI as it can actually cause hallucinations, believe it or not. Get a urine test run.

Check for a uti first. Then see if the combinations of her meds could cause interactions. Is she on anything new?

Uti. Get her to an ER if there is no other resource.

Mom is in a SNF, under hospice care with an RN and a facility doctor on site. She does have a history of UTIs, and has been catheterized since December. Hopefully, the staff would notice signs of a UTI, given her history. The hallucinations seem very similar to ones her sister has had in the past, while dealing with advanced Parkinson's. The RN suggested adding Seroquel.