Booking different room types for family members?

Interesting point - I would agree that if one family was five and you had to get them a "family" size room on the ship and the other family was four so could fit in a regular size room, that would fair because there's a difference in the family's needs. But here, since the SIL has kids, it is not like she needs less space, or would use the verandah any less. Really I guess it is more like the difference between Savannah View and Standard View, or business class versus coach on an airplane--you are paying more for a nicer/upgraded in-room experience, without any change based on the family's individual needs, so I still think the more polite thing to do is to get the same for your guests.

I agree in this case with your analogy of Savannah view vs Standard View since space isn't the issue here.

I guess my point with the studio vs 1 bedroom is that, it accommodates the same number of guests, even though the 1 bedroom is more spacious. I don't feel I would be treating them poorly if the family members were in a studio while I'm in 1 bedroom...especially if I've always booked a 1 bedroom.

It really does depends on the attitude within the family members. I wouldn't feel bad about inviting them to stay in a studio because they are perfectly happy and quite excited to do so. They wouldn't accept an upgrade even if I insisted.

Even if I invited someone that wasn't a family member (although I wouldn't do that), my main concern would be to ensure that they get an appropriate stateroom for their family size, but I still won't feel the need to get the same category room for everyone. If we were invited, and we wanted a better room, we would insist on paying for an upgrade. Although this would be a bigger issue for me if they were not relatives. I would feel uncomfortable upgrading if the person paying was not. On the other hand, my relatives know that we may upgrade and they are perfectly fine with it.
 
Thank you everyone, for the detailed responses and the gentle smack in the face that I am crazy to even consider going through another trip of any sort with them

You’re not crazy. You’re really sweet and kind, and obviously optimistic.

Just saying that there are situations where it is acceptable to differentiate yourself from your guest.

Agreed. Guest room vs master bedroom. My bedroom has a deck. The guest room and my son’s room do not. I’m not giving up my room to a guest simply because they want the deck. Once everyone’s awake they can use the deck.

Same on the ship.

(Above situation is true. I really do have a very weird deck off the master bedroom)
 

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