Spanish often uses tener in ways that sound different from English. Here, tiene menos gente literally means has fewer people, but in natural English we would often say there are fewer people or it is less crowded.
So:
This is a very normal way to express population or crowd levels in Spanish.
Gente is a very common collective noun meaning people in general. In everyday Spanish, menos gente is much more natural than menos personas in this kind of sentence.
Also, gente is grammatically singular, even though it refers to many people. That is why you say:
not hay muchas gentes in this context.
Por eso means because of that, for that reason, or simply so.
It links the first idea to the second:
So the logic is: there are fewer people there in October, and for that reason my sister wants us to go back then.
Because the subject changes.
In the sentence, mi hermana is the person who wants something, but nosotros are the people who would return. When Spanish has one person wanting another person to do something, it usually uses:
querer que + subjunctive
So:
It is subjunctive because it comes after querer que, which expresses desire or wish about another person's action.
Pattern:
Examples:
This is one of the most common triggers for the subjunctive in Spanish.
Volvamos is the present subjunctive form of volver for nosotros.
The verb volver is a stem-changing verb (o → ue), but in the nosotros form of the present subjunctive, that stem change does not appear.
So:
This is normal for many stem-changing verbs:
Here, volver simply means to return / to go back, and the destination or context is understood from the sentence.
So quiere que volvamos entonces means she wants us to go back then, with the place understood from the context.
Yes, both refer to time, but they do different jobs.
So the structure is:
Using entonces avoids repeating en octubre.
Yes, it could, but it helps make the cause-and-effect relationship explicit.
With it:
Without it:
So por eso is there to underline the reason.
Yes, it is natural and correct. It sounds like standard neutral Spanish and works well in Spain.
A speaker might also say similar things like:
But the original sentence is perfectly normal.