My iPhone 7 allows only one device to be connected to its hotspot at a time
I use hotspot quite a bit and can report that this isn’t how the system is designed. I have many devices connect to one hotspot and am pretty certain I tested that back when I had your iPhone 7 hardware in the US so it should be easy to confirm it’s capable of multiple connections.
What was true in the past was carriers (for example Verizon and AT&amp;T capped connections at 5) can establish these limits for most of their data plans.

How can carrier limit hot spot connections

Since your cellular carrier specifies whether you can use the hotspot or not, have you reached out to them to determine if they have enabled any restrictions or profiles relating to hotspot usage? In the US, all of the carriers I have seen don’t cause this to happen, so I’d hate to tell you to update / wipe your device and test with all content and settings erased if this is something the carrier controls.