I once hosted a writing contests @steemjetcontests when I had much time for steemit. that was when steem price was cool and an upvote was worth something

Like you said here

This is not an easy decision to make, especially once you’re organizing a contest for the first time and you cannot predict the amount of entries.

The contest I hosted had over 120+ entries and it was not as I expected.

It wasn't an easy thing to judge it. Took sleepless nights but then it was judged at the end.

From my own point of view I will suggest he splits the lots but still rewards better content creators, like the first five of 'em with the highest
Next 10 second higher.
Next 20 third higher
Then the next 50-70
can split the share equally.
Not all should be rewarded but all deserve atleast a consolation token for their time spent in writing.