@Julie4231 My guest bedroom is quite small. It only fits a single bed comfortably leaving enough space to move around. So I only host solo guests. I can tell you that this has been a wonderful experience- I love hosting solo travelers. And my guests love that room. (They also have a private bath, ensuite).
If you try to host 2 people with a bed big enough to accommodate that, you will also need bedside tables and reading lamps on both sides of the bed, so that will take up even more space.
When your family and friends come to stay, you can always have a spare foamie to throw in there.
I would advise you to consider doing the same- set it up for 1 guest only. Keep the room quite simple, don't put in too much furniture. As long as there is space to move around, without closets or doors being partially blocked, it won't feel cramped.
Peruse books and blogs on working with small spaces. Use interesting wall paint treatments in light colors and cool window treatments as decor, as you won't have space for extraneous things.
If you are going to have a kitchenette in the space, you should either have a small sink for dishwashing, or do as a friend of mine who had a studio rental does- she just leaves a small plastic tote for guests to put the dirty dishes in and she washes them in her dishwasher. What you want to avoid is guests washing dishes in their bathroom sink and clogging it up with bits of food.