In Portuguese, this term usually refers to a traditional festival based on the culture of a certain place. I don't know the equivalent English term, but "local festival" definitely sounds better than "regional party" (which could even be confused by a political party).
We have fairs and festivals that are public parties. A party is usually private. Duo's idea that festa = party is forced. Festival and festa are not the same, but we often use the same word in English for both.