I'll pick (C)
The usage of "would rather.." is similar to that of "prefer to.."
For example, if you said: "I would prefer my friend attending XBS to YBS." would translate to "I would rather my friend attended XBS"
Here, the guests are not trying to decided whether the hotel would give them room at all. The fact that they would be provided with rooms, but they would prefer not to have rooms facing the street. This fact would look like
"Some hotel guests would prefer the hotel provide them rooms away from the street to rooms facing the streets"
and would translate to choice (C) in the "would rather.." term
The stem says that some hotel guests would prefer rooms which do not face the street. The preference here is between the rooms which face the street and rooms which dont. Therefore, the bare-bone paraphrasing of this argument would be: some guests would prefer
(to stay in) rooms which do not face the street to
the rooms which face the street.
Option (D) convey the preference is between the hotel providing them rooms and the hotel not providing them rooms. "Some guests would prefer the hotel provide
them rooms (facing the street or facing the beach or the lake) to
not provide them rooms at all. The preference being conveyed here takes away the focus from the kind of rooms the guests prefer.
Just my thoughts. I may be wrong here, but it would be great if anyone could post either the OE or their arguments.
Editing post because I'd mistakenly thought someone had posted the OA.