If you won't use it, then I would get rid of it. Otherwise, it just becomes something else that you will have to clean and, depending upon the dimensions, cleaning around the base of a free stranding bath can be a challenge. This may also allow you to have a separate enclosed toilet, double shower and/or double vanity (if you don't already have those), which may offer more practical benefits than an infrequently used bath. If necessary, possibly consider upgrading the bath in the main bathroom to a more luxurious size so that if you do feel like soaking in the tub, that option will still be available.

it's time for this bath to be retired back to the paddock...post a plan of the bathroom including measurements, size and location of doors and windows to invite suggestions for an upgrade

Kate's idea of using the pantry space is an excellent suggestion as a toilet can comfortable fit within 800 x 800 alcove with the end opening towards the bathroom and closing the extra door from the laundry toilet could allow enough space to squeeze in an extra handbasin but please double check all the dimensions ..measured from wall to wall the bathroom has to be more than 1200 x 2, the laundry more than 1200 x 2 and the toilet size isn't right or there wouldn't be enough space to open any of the doors??

Depends from size of the tile. Full tile between edge of the bath and bottom of the niche looks better, If you are planning mitre around the niche.