The Shulchan Aruch states (640:4) “One who is in discomfort is exempt from being in a sukkah since the Torah said ”You shall dwell in sukkot seven days” and the sages explain: “dwell in it as if it was your residence”, and no person will live in a place that causes him discomfort. One who feels discomfort is exempt from living in a sukkah on condition that only if he left the sukkah would he avoid that discomfort, but if he wouldn’t prevent it — he is not exempt from living in a sukkah.
The Chavas Yair (in Makor Chaim 640) writes that if a baby is in a crib and one needs to rock the crib at night to calm him down, then the caregiver is exempt from being in a sukkah. Based on this, Rav Ovadya Yosef wrote in his book Chazon Ovadya (Sukkot, page 200) that anyone whose wife is weak and they have small children who wake up at night and cry, and someone has to get up and care for them, and he will have no way of knowing when to get up for them if he sleeps in the sukkah — he may sleep at home to take care of his children.
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I manage a dormitory which during the holiday season serves as a vacation spot for families during Sukkot (and also provides them with a sukkah). As part of our service, we have to provide linen and pillows for our clients. Since there are families that only come during the middle of chol hamoed, we have launder a large quantity of linen during the holiday. Is it permissible to launder the linen?
It is forbidden to launder clothes on chol hamoed, even if it is for that day’s need. The reason for the sages’ decree is due to their concern that a person wouldn’t wash his clothes before the holiday and the beginning of the holiday would find him with unclean clothes. It is permissible to launder hand towels and small children’s clothes because they always get dirty. If one washed them by hand, he should wash each one separately, according to whatever is needed the most. If he is washing very filthy baby clothes or diapers, he may even wash them together because they are always needed.
If they are being washed in a washing machine, he may wash many children’s clothes together as long as they are needed for the holiday. All the more so he may do it if he includes baby clothes and diapers. But clothes of adults should not be added to the children’s clothes in the washing machine because of the decree of our sages to prevent a person from beginning the holiday unkempt. (Shulchan Aruch 534, Chazon Ovadya Yom Tov).
The Shulchan Aruch (534:1) writes that it is permitted to wash hand towels during the holiday, because even if he washed them before the holiday, they become dirty and have to be exchanged every day. Even if he has many of them, he is permitted to launder them on the holiday. In keeping with this, the Chazon Ovadya (ibid.) wrote that since one has to change linen for the new guests coming to the hotel, it is permitted to launder it.
To sum up: It is permitted to launder sheets and bed linen in hotels and hospitals when it is required for hygiene, but concerning laundering at home, there are different opinions, as explained above.