If you want to visit the festival for several days (recommended!) and are not from the area, there are several places to stay. The most comfortable is to stay at Parkhotel Tjaarda Oranjewoud. You are then in the middle of the festival and can walk or bike everything. It is also possible to book rooms at Hotel Heidehof in Heerenveen which is just a stone's throw from Oranjewoud, or Hotel2 Heerenveen.
For more ideas, visit the Tourism Southeast Friesland site, where lots of great options are listed. Below are some more concrete ideas.