Oh wow, that was a thing that happened. I honestly wouldn't have put two and two together about the butterflies no longer being around after helping the Tapir god. I still have a lot to of mysteries to explore of the Hinterlands. I'm actually not sure what to make of what happened there. A shadow of memory who's emotions were relived through Pedro of something that happened involving mythical being, maybe through the perspective of Grandpa P? But as of know, I have no clue as to what any of it means besides likely related to the local missing children.
I thought the missing children was a red herring that adds more darkness to the region in a (sadly) very real way. Between going to the church and reading in the non-fiction section of the library the possible explanation to the missing children can likely be a less magical reason and more dark reason that serves as a commentary on the dark side of humanity. I honestly don't know which would be worse (not as in writing but in evil in the world), a mythical being being behind the missing children for some unknown but sinister reason or just kidnapping and sex trafficking's done by regular humans. Though there isn't a reason why it couldn't be both or both in one. I don't know if the intent was to think about that potential real and dark topic but if it was, kudos for taking the risk of broaching a topic that most would rather avoid and pretend doesn't exist.
Keeping that dark place in my mind, I almost want to hypothesize that Pedro relieved briefly an incident where Grandpa P was investigating the shed as a lead on the missing kids, something involving magic happened and Grandpa P saved a child. Even a darker though would be that maybe Pedro was abducted and rescued by Grandpa P but has suppressed the traumatic memory.
A more cheerful but less likely hypothesis is that the missing children ran away from terrible lives living in the Hinterlands and many of them found their way to the hotel where they started new happy lives for the times that the hotel was in operation and never looked back.