I would remove the return and create a wet bar/coffee/tea bar for beverages and refreshments. If they are early risers you can keep them in the room until a decent hour AND it gives them the option to sip tea in front of a fireplace.

If this an Airbnb, when I returned home and told others about the place, I'd definitely mention the wetbar in the bedroom, I would probably not mention a sitting area.

Love what @Paul F. suggested, and great mockup! I would take it a step further and suggest you add a screen door to the fireplace if you are allowing guests to use it. Otherwise, you will end up with quite a mess on the floor.

Doors by: Fireplace Treatments

Keep the kitchenette. Seating places in bedrooms often just become luggage racks. Your living room view of the ocean and the fireplace out there are enough to keep people from wanting to sit in this bedroom. The counterspace is nice to have for keeping belongings on and then you don't have to worry about the floor not matching where the kitchenette was removed. Had a coffee maker to the counter. It will be appreciated.

If this is a rental I’d keep the kitchenette and figure out how to rent this room separately from the main house for more income. It would need a separable entrance.

We're keeping the kitchenette! Thank you for all your input. We are going to add a coffeemaker to the main kitchen and add a kettle and some mugs to the kitchenette.

Update: this is what we did.

Good job. IMO you have improved the room.