A quick look at the internet confirms that caravan hire in peak season is from £40 per day or £250 per week even if you collect and tow it yourself. Hiring a decent sized campervan in peak season is more like £500 upwards per week.
In theory you can have hot showers in either but you'll need to transport all the water from distant taps to refill the tanks. Only large motorhomes have sizeable on-board water storage. Festivals generally don't allow repeat trips to fill up, it can churn up the roadways too much if everyone did it. And you have to dispose of the used water.
I bought an old caravan five years ago, did some work on it and it's still fine for festivals - main benefit being a balanced flue space heater! If you know what you are doing with gas systems, brakes, electrics etc you can do caravanning on the cheap. Otherwise it's £60 per hour even for simple repairs. But you do need somewhere to store the wretched thing the rest of the year. Buying a cheap motorhome is asking for trouble unless you are very good with DIY. You need to tax, MoT and insure it too. For most people - B&B makes a lot of sense in Sidmouth.
In summary, it seems there is scope to encourage more locals to do B&B during FolkWeek.