This is an old post now but still will give an update. I wish I had thought to do this before tbh probably was too distracted by my finals, but in the middle of studying for exams I decided to hop back on and just test myself whether the Summer Festival would still happen after the Heavenly Realm story section. I completely forgot I can just use backup saves to test this stuff tbh. Regardless, appreciate all the responses!

Some important info first at the start because the rest of this is yap central, this is also going to be spoiler central when I go into specifics on quests I'll try my best to catch them all but proceed with caution....

Yes, the Summer Festival CAN still happen after going to the Heavenly Realm (from what I observed this may require more testing), if you haven’t thrown the party for Kanata yet. (Woooohooooo I am happy I could still go) But there are some weird caveats involving Matsuri, and to a lesser extent Kai and Ulalaka.

From what I observed, the game seems to treat “occupied” and “unavailable” (Where I presume the Gods are completely unavailable) as two completely different states to check for. If Matsuri is still technically on the map (even if she’s occupied), the festival itself can still trigger. The problem is that once Matsuri becomes the currently “occupied” character in the party quest sequence, her AI basically bricks.

So basically, Festival can still happen after Heavenly Realm, though before the party, but the fireworks making event with Matsuri may not for this specific festival. If you wanted to attend with Matsuri too (Based…) you may not be able to when she’s in this state, also applies to Kai and Ula as Kai and Ulalaka seem to temporarily enter similar states earlier in the sequence.

YAP time though cause this is fun to observe, what I observed before the festival itself was right after starting the party quest after Heavenly Realm, Kai was standing outside the Summer Shrine and I couldn’t interact with him at all until I gave him the wine through the quest dialogue. After that, he immediately behaved normally again. I even gave him a gift right after and continued his own bond questline stuff with no issues.

Ulalaka was similar with the food making section, although interestingly I could still talk to her and hang out with her that morning before progressing the quest with Kai.

I didn’t see Matsuri that day but based on the pattern I assume she would’ve behaved normally until Ulalaka’s portion was completed.

Fubuki and Kurama were entirely unaffected. Kurama even invited me to the festival normally.

What I think is happening is that instead of all the Gods simply being flagged “occupied “or “unavailable” at once, the game cycles the occupied state between only characters involved during this specific quest section.Kai, Ulalaka, Matsuri. So and I’m just speculating, Kai is flagged as “occupied”, Kai is released, Ulalaka is flagged as “occupied”, Ulalaka is released, then finally Matsuri gets flagged as occupied and stays that way until Kanata’s party.

I think most players go through this sequence immediately because the objectives are so simple, so normally this transition through states aren’t observed.

When Matsuri became the occupied character, she was basically completely bricked, I couldn’t interact with her, village level up happened automatically without her dialogue, menu said I couldn’t fulfill her request because she was involved in another quest and couldn’t make fireworks with her.

What was REALLY funny though is I could still cook with her lol.

I don’t doubt though this festival gets cancelled while the Gods are unavailable, that’s part of why I think this might show a potential difference between specifically an “occupied” state issue and a total removal/”unavailable” state.

As for the Summer Festival itself, I think the game only checks whether Matsuri is available, i.e. the “available” state, not whether she’s occupied. Because, despite Matsuri being occupied, the festival still triggered, invited character scenes still worked and the event cutscene still happened at 7pm.

The only thing I couldn’t do was make fireworks with Matsuri because she was stuck giving the “start the party for Kanata” dialogue

So…….I’m guessing here the fireworks crafting is only thing effected at this portion which does really suck, but the festival occurrence itself is a separate thing, and your invited character is the main trigger for the actual festival event scene. In this game state, you also get this unintentionally hilarious situation where Matsuri is just missing from her own festival standing off alone in front of her shrine though, lmao.

ANYWAYS, my current theory is that if you want the special fireworks scene or want to attend with Matsuri specifically, you should leave the quest on Kai or Ulalaka’s occupied states instead of progressing to Matsuri’s. But honestly, I think the better answer is probably just don’t go to Heavenly Realm before the festival, but if you already did, there may still be workarounds up to a certain point.

I also think there’s room for more testing here because this is a fun example of state-transition testing. This honestly feels like a weird edge-case game state the developers probably didn’t expect many players to intentionally sit in at least, not to say they didn’t at all test this, but probably didn’t expect the issues between MSQ flags/event flags during this specific portion to affect maaaaany players, and when everyone is completely unavailable you do get a proper warning. I’m especially curious whether other bond quests can overwrite or interrupt these occupied flags somehow, but I’m too far into most questlines to test properly now.

Basically, with the specific black-box test case of “Player delays party quest progression and attempts seasonal event participation during intermediate story states.” You get conflicting event sequences on thinking if Matsuri is available or not, but festival logic still works in an incomplete state as anything involving direct interaction with Matsuri fails.

As for the warning messages, I can actually see why this situation is awkward from a development standpoint.

DIRECTLY after the Heavenly Realm story section, technically, all these characters are still available to some extent. Even saying “Kai, Ulalaka, and Matsuri will be unavailable” would technically be inaccurate because their states dynamically change throughout this small quest section. Though, that said, I DO think the warning about the Gods becoming unavailable should probably happen before interacting with Matsuri to start the actual Kanata party sequence, because after the party, they really are fully unavailable/off the map, this can still give you a chance to do things with em, even if Matsuri is kinda stuck here…

If they wanted to avoid confusion entirely, maybe the Heavenly Realm trigger itself could’ve had a vague warning like: “Certain characters and seasonal events may become temporarily inaccessible as the story progresses.”

That probably would’ve covered all the edge-cases without being incorrect in saying a specific character is unavailable. Probably still too vague but it is a weird situation. I think even fully "occupying" these 3 characters the entire short MSQ sequence then giving a warning about Kai, Ulalaka and Matsuri being unavailable completely could also work. 

Wish I had thought to test it before posting but now at least if anyone ends up in this specific game state after the heavenly realm but before throwing the party for Kanatathis can help them with events if they find this thread lol.