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I was in a rather poorly designed lobby the other day. It was all hard surfaces and there was a crowd in there. With all the reflections, it was hard to distinguish specific people talking from the general crowd noise.
Yes, that kind of room is the hardest to make sound good. A large number of people actually help in that situation, but what it really needs is some damping treatments. Directional speakers help too.
I have been in rooms like that before. Like Wayne said, the bodies there are helpful but of course if they are all talking, it still gets pretty noisy. Rooms like that could really use some rugs or tapestries.
Oh yes, I'm sure the people's bodies absorbed some reflections. However, with the general hubbub of everyone talking, it was hard to hold a conversation with people who were just a few feet away. Sometimes their words were difficult to distinguish.
Was it a small room? A larger room allows people to stand in smaller groups that way the conversation next to you doesn't blend in with yours. Were there more people there than they anticipated?