One of people’s favorite hobbies is to listen to music.

is there another word to say for people. it sounds too informal for an essay.

Many people have a hobby of listening to music.
The favorite hobby of many people is to listen to music.
Listening to music is the favorite hobby of many people.
[I think the culprit in your sentence is the plural form of people. Thus, I simple restated the sentence but used the singular form of the word. You could substitute "teenagers" or "20-year olds" or some other category if you are referring to a particular set of people.]

Yes, your rephrased sentences are correct and more formal alternatives for the word "people." You can use phrases such as "Many individuals," "A large number of individuals," or "Numerous individuals" to maintain a formal tone in your essay. Additionally, you can also use specific demographic categories if applicable, such as "Listeners," "Enthusiasts," or "Fans of music." Remember to choose a term that accurately represents the group you are referring to.