I'd guess that it's a little of both. The event was beginning to get a bad rep because of how rowdy it would get. The alcohol was cut back in 2016 and ever since then the atmosphere around the park has been toned down as well. I would say that the change in scare zones from being intimidating to photo/selfie ops and performances is in part due to this and also changing with what people want out of the event. Social media has had a heavy influence.I disagree...I think the event has changed to the point where the audience attending doesn't want scares they want Instagram-able moments and the places that have scares, are the houses the general public don't have interest in.
The houses are a bit more PG-13 than they used to be as well. This has been a very gradual trend over the last decade and made a noticeable jump last year with Stranger Things. I've never really thought the HHN houses were scary, but they're noticeably less gory than they used to be. This I believe is both for the event to have wider appeal and also because Universal recognized that because of the scope of the event and how they operate it, intimate scares are not really possible, so they focused more on atmosphere and immersion in the houses.