According to Rambam, whether Yom Tov Sheni is observed in a specific place does not depend upon its proximity to Jerusalem. Rather, it depends upon how many days of Yom Tov were celebrated there during the period when messengers spread the word about the sanctification of the month. Areas which celebrated only one day because the messengers reached them before Sukkot, even in the Diaspora, continue to celebrate one day. Areas where the messengers did not reach, even within Eretz Yisrael, continue to celebrate two days. In an area which theoretically could have been reached by the messengers, but in fact was not – whether because there was no Jewish community there or because it was inaccessible by road – Rambam maintains that since anyone living there then would have kept two days, those living there now should continue that as well (MT, Laws of Sanctification of the New Moon 5:9-12).
In contrast, according to Ritva, ever since the beit din stopped sanctifying the months, Yom Tov Sheni does not depend upon the messengers, but upon the boundaries of Eretz Yisrael. Two days were celebrated in most of the Diaspora, and one day was celebrated in most of Eretz Yisrael. Accordingly, when Hillel II and his beit din developed the calendar and sanctified future months and years, they ordained that those in the Diaspora would always celebrate two days, while those in Israel would always celebrate one day (Ritva, RH 18a and Sukka 43a).
Even though at various times and in various places there have been people in Israel who followed Rambam and kept two days of Yom Tov, the practice which became accepted is to follow the Ritva, as most Rishonim seem to accept his position.
A question arises regarding the status of Eilat, as it is possible that it is not within the borders of Eretz Yisrael. According to some commentaries, “the River of Egypt” refers to Wadi El-Arish, which is north of Eilat. Nevertheless, in practice we consider Eilat to be within the borders of Eretz Yisrael, and only one day of Yom Tov is celebrated there. For even according to those who say that “the River of Egypt” is Wadi El-Arish, it is reasonable to maintain that Eilat is still within the borders of Eretz Yisrael. This is certainly the case for the majority of the commentators, who identify “the River of Egypt” with the place now known as the Suez Canal (see Peninei Halakha: The Nation and the Land 3:15). Those who rule this way in practice include R. Herzog in Heikhal Yitzḥak, OḤ §55; R. Frank in Mikra’ei Kodesh, Pesaḥ 2:58; Mishpetei Uziel 8:47; and Tzitz Eliezer 3:23.