MMORPG - Handling Multiple Areas

This is kinda tough to explain. So, I will try my best.

Suppose the world has 5 islands. There are players on all the island. So, I don’t want to send the data of players, items, enemies and other entities that are on Island 1 to the players of other islands. I mean there is no point in doing that. So, is this the right approach ? I mean is this how people usually go about doing this ?

This is something I thought:
I store the player’s data in an ArrayList. So, I was thinking of making an ArrayList for all the islands and then players of the same island will share their data. But, I figured as the no. of islands will increase, things will get unorganized and complex.

So can you guys help me on how to handle this ?