"בבית שלהם יש מטבח, סלון וחדר אורחים."
Translation:In their house there is a kitchen, a living room and a guest room.
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I don't think חדר אורחים is used much in recent decades, but when it was in use it meant only a salon. In a way it was a "living room", since in a typical house, that has just one major "public" room, that room - which I believe in English would most commonly be called "living room" - was commonly called חדר אורחים in Israel.
If you have a bedroom for guests I think you'd say חדר שינה לאורחים.