Frequency of occurrence - dummy variables
There's no general rule that can apply to all cases, and there's a lot of context missing in your post to say anything conclusive.

Having said that, I think that a good approach is to treat the cities with a lot of occurrences each on its own, and then group all others under a 'other' category.

Going further, you could have multiple 'other' groups, grouped by various criteria, for example, geographical criteria, or anything that makes sense in your context.

Hope this helps.