Adding a custom taxonomy to locations using WP methods will allow you to set and manage categories for the location, however to integrate searching you need to code in hooks yourself. The only ‘automatic’ way this integrates is into the WP_Query loop, but you still have to make your own query.
Whilst angelonwl’s suggestion may work, it’s not the most efficient one. He’s used the snippet found here as a basis for creating this new filter for you:
https://wp-events-plugin.com/tutorials/creating-custom-event-search-attributes/
I’d recommend looking at the suggested alternate method, which would add a condition to the SQL instead. That’s how we do it with normal categories, and you can see this in action within classes/em-object.php around line 664
With regards to the admin area, you probably have to add this as well, we do this in the file classes/em-event-posts-admin.php file under restrict_manage_posts(). You’d have to add a similar field in the same way.
Hope that helps!