Well, you don't need to repeat for every city in the world because the vast majority of cities only have one name - ie they either didn't exist 'back in the day', or weren't well known enough to be given a non-local name by other nationalities.
For places which do have non-local names given to them, yes those names should be reserved. What should really happen is when the city of Roma decides to register .roma, they should automatically get .rome, .рим, .rom, etc pointing to the same servers.
Ultimately it may turn out to be a non-issue, but ICANN are playing it safe by preventing ne'er-do-wells from hijacking translated names and scamming people through them.
I'm not entirely sure I agree with that decision, but I can see why they're doing it.