The story is told to demonstrate how parochial the two women are, for Tiberias was a noted resort and famous city. But it seems likely that, for someone who lived in the country, ancient cities had a definite bad odor. In one of his letters, Seneca writes:
I expect you're keen to hear what effect it had on my health, this decision of mine to leave (Rome). No sooner had I left behind the oppressive atmosphere of the city and that reek of smoking cookers which pour out, along with a cloud of ashes, all the poisonous fumes they've accumulated in their interiors whenever they're started up, than I noticed the change in my condition at once....
Of course, the ancients had very different ideas about sanitation, cleanliness, and modesty. Readers of Josephus will remember the amount of time he devotes to the "strange" Essene toilet habits:
War 2:148-9: "Nay, on the other days they dig a small pit, a foot deep, with a paddle (which kind of hatchet is given them when they are first admitted among them); and covering themselves round with their garment, that they may not affront the divine rays of light, they ease themselves into that pit, after which they put the earth that was dug out again into the pit; and even this they do only in the more lonely places, which they choose out for this purpose; and although this easement of the body be natural, yet it is a rule with them to wash themselves after it, as if it were a defilement to them."
Josephus obviously thought it excessively modest to defecate in private (uncovered public latrines were common in his day), and excessively fastidious to wash afterwards — which sheds a certain light on the stench of ancient cities.
Interesting observations (including the quote from Seneca) and bibliography can be found here.