There are lots of advantages to having a smaller "Favorites" Library in addition to the large Archive Libraries.
The ability to keep our Favorite pictures on the internal drive, as léonie mentioned is maybe the greatest advantage.That's especially important for laptops (like my MacBook and my MacAir) and for mobile devices (like my iPhone and my iPad.) Having the System Library kept internally is nearly a requirement for MacBooks.
I use iCloud Photos to keep my devices' Libraries all synchronized, and with a smaller Favorites Library I don't need so much iCloud Storage space--just three bucks a month does it for me.
Searches are faster and more efficient. Even though I use lots of Albums and Folders, and I add lots of keywords and captions, it's way easier to find the pictures I want without having to scan through hundreds of hits to my queries.
I need to back up my Favorites Library often, as it changes often. But the Archive Libraries don't need backing up so much. Time Machine on SSDs can easily take care of the Favorites, and the Archives I just to external drives (like those 10TB HDDs I have) much less often-- and for those I don't mind the slowness.
I say Archive Libraries, plural, because I have divided them up, with some overlap. I have an iPictuers Archive, a Work Pictures Archive, a Nikon Archive, a Wife's Old Family Pictures Library, a My Old Family Pictures Library, (because I can't remember who people like Uncle Lemuel belongs to,)and a few Archives before and after major life events.
WhenI started this, I duplicated my one Library, and then I went about removing the non-favorites from it. It's way easier to be sure of non-favorites than of favorites. So after the first run-throughs, I continue to eliminate pictures that see redundant or just aren't images that I want to see over and over. All the pictures in Favorites are also in some other Archive Library. This is how I used keyword "quick-picks" to help:
Choosing Favorites using Keywords in Mac Photos - Apple Community
For handling multiple Libraries, most of us use the trusted 3rd party app PowerPhotos ($40.) PowerPhotos makes it easy to move pictures, albums, and folders between Libraries while preserving the metadata and organization. It also has lots of other features, like advanced Duplicate searching, batch editing of photo metadata, and searches through multiple Libraries. They offer a free trial version.