Direct answer
Large crowds can add player movement and collision work. The server can experience tick load while nearby clients separately suffer rendering FPS loss.
How to check it
- Profile a crowded lobby during a real event and record online player count and average/peak MSPT.
- Compare players stacked in one location with players spread across multiple areas of the same world.
- Check for plugins that repeatedly teleport, push or apply velocity effects, which can make collision work look more expensive.
Example: A crowd of players standing still in one lobby may have less server collision work than the same group being repeatedly pushed by a plugin. Keep activity comparable.
What to change
Redesign spawn areas and event queues to prevent unavoidable crowding. Only change collision/team behavior when gameplay and minigame requirements permit it.
Software and version notes
Disabling player collision may change PvP or lobby interactions; scoreboard-based collision rules are different from Paper entity activation and tracking distance.
Verify the result
Test normal movement, combat and minigames with the same event size, alongside peak MSPT.