It's about confidence in general, not about penis size. I am wondering why the OP brought up penis immediately. Most people, especially men, know that penises are generally tiny when soft. I am way, way above normal when I am hard, but I am a major grower, so I look just as "small" or even smaller than most men when I am soft. (In fact, the reason my wife hates when people see me naked is because she is afraid people will think I am small; she is a size queen obsessed with size, so for HER it's an issue.)
Going back to confidence, here is a shocking perspective: I have been extremely large since I was VERY young. I hated it so very much. I never wanted anyone to see me naked in case I got even a slight chubby because I hated how much bigger I was than everyone else. A few people saw me half hard when I was young and they teased me so much about it. Even my gf in college teased me about it.
So, it goes both ways. His penis size has nothing to do with it. Plus, once he sees all the other naked people there, his body type will fit right in. Very, very few people are fit, college-age women co-eds. You just see those in videos and photos because that is what people expect to like, and for every one photo or video you see, there are 1001 who aren't like that AT ALL.
Plus, true must-be-naked places are extremely rare. As someone said, the pools require nudity because of the amazing filters and chemicals they get to use when there isn't fabric in the pool, but you don't need to be naked anywhere else. In fact, more and more you have to wear clothing now in the restaurants, stores, and even some events. (I think that's weird: nudist campground/resort, but you have to be closed for the dance at the club house.)