I mean, the pandemic and NH's release basically happened at the same time coincidentally, it's not as if Nintendo went "looks like a viral pandemic's happening soon, lads... quick! Release Animal Crossing now instead of at the end of next year with free updates, that'll sell gangbusters!" It's more "they were going to release NH in March 2020 since at least sometime between September 2018 and June 2019 anyway, and sometime around November someone caught the first recognised case of COVID and things steadily snowballed from there"
There's ultimately a good load of other reasons why NH elected for free updates. Some of them clearly come from the devs, some of them come from higher-ups:
- for a start you've got the entire "the Wii U failed in part due to the lack of regular releases due to HD game development being much more time consuming, and doing games with free updates is one of the ways you can ensure that" thing. To be fair, I don't think Nintendo would do it for literally everything (they're not Square Enix, who are Incredibly Guilty Of This), and they generally only do it for stuff that you're going to potentially be playing for a long time on and off (ie. sports games, Super Mario Mario Maker and Animal Crossing).
- Animal Crossing is fundamentally a game designed around interpersonal communication and the shared experience of playing together doing similar, yet different things. It is also a game that as a result can be localisation-intense compared to other games. This... is not remotely ideal. The GameCube game didn't have online, released during a time when Nintendo's localisation could often take much longer, and didn't yet have the expectation of being a series that drives console sales, and so it took about 3 years to release it in Europe. Wild World and LGTTC ended up being much smaller experiences than the GC game in part to make that localisation process a lot easier, and as a result those games ended up releasing at similar times worldwide (and even then, the European release of WW came out a few months later, and the Korean releases of both WW and LGTTC came out a couple of years afterwards). But ultimately, I think at least part of this decision comes down to how they handled the release of NL. There's 7 months in between the release of it in Japan and the release of it in the USA and Europe. That's an incredibly long time in AC terms. Japanese players have already seen a good portion of what's available in the game if they got it Day 1. They've already pretty much fully upgraded Main Street, they've gotten the Roost and a lot of the PWPs, and they've seen Thanksgiving, Christmas, New Year's, Festivale, Easter and April Fool's Day already... and this has been documented in excruciating detail online for even Western players to find, and they can't even experience it firsthand. By the time it's come out in other countries, people have probably already gotten bored with it and moved onto something else
- On top of that you've got people who clearly haven't gotten the entire "play in real time" memo jumping ahead to stuff like Halloween and Christmas also spoiling that stuff ahead of time, which also derails the shared experience factor of Animal Crossing
- On top of that, in between the release of NL and NH two games have released: Splatoon (which was the first free update game Nintendo released, and shares the same producer as AC), and Animal Crossing: Pocket Camp (which was developed around the same time as both the Welcome amiibo update and NH), and I generally think that NH uses updates for similar reasons as both. Splatoon's updates were generally designed for people to get to grips with how the game operates and have new things come out over time (and in general there's some trace of this approach throughout NH's updates, from bushes coming out in the spring, swimming in the summer, and pumpkins in the autumn; as well as a decent chunk of 2.0's features largely boiling down to "this is the grand finale of the game, here's a coffee shop where you can see all the other NPCs and here's some things so you can now do stuff faster!"), whereas Pocket Camp's are designed to be eye-catching and make you go "whoah, new thing, better play the game!"
- Finally, you've also got the fact that Animal Crossing's both a proven system seller and an evergreen seller. It's something up there with the big boys of Mario and Pokémon. If NH had released in late 2021 (when it was finished), that's pushing it in terms of release timing. If it had been released in 2022 or 2023 (if they were aiming for Even More Content), that's way, way too late. Look at what was being released in those two years, it's predominately second entries for series that already have a presence on the Switch (Kirby, Splatoon, Bayonetta, Zelda, Pikmin, 2D Mario, Warioware). It needs to be out sooner, not later!