I'm with you, it would make a big difference to me also.
If it was a house with a lesser number of bedrooms then I might think differently but a family bathroom upstairs is a standard nowadays is it not? If space is an issue maybe a toilet, good shower (most people prefer them) and sink could be enough. Maybe the auctioneers are right about letability aspect short term but longer term investment view why not do the bathroom upstairs now whilst you are in the refitting groove?