Rakshasas are good infiltrators because of their at will disguise self. But they should sleep sometimes.
The problem is that this spell lasts for only one hour.
They have no any special wording like undeads or constructs do:
Undead Nature. A wight doesn't require air, food, drink, or sleep.
So it presumes they do need to sleep.
How can a rakshasa hide their true form from possible observers when they are sleeping?
It is likely that any Rakshasa, especially one that's advanced enough to be the BBG, will be experienced and aware of the limitations on their abilities and at least moderately wealthy. As such they should not be caught off guard by turning back to themselves when sleeping and should be able to easily afford a private room whenever they travel. With a 20 CHA they're unlikely to lack "companionship", thus providing an in game reason to prefer having their own quarters even when traveling (something like, "I'm not an exhibitionist about Everything!").
The main challenge would be IF they want to travel with the party while in the wilderness, then they'd need to bring their own, private sleeping accommodations or have a way to extend the Disguise Self spell.
Make the Rakshasa a spellcaster with a unique spell for security. As an example, I played in a game where the Wizard researched a way to sleep more securely in the wilds and came up with the following spell:
Part of the Scenery - 2nd-level illusion, duration 9 hours, Self only; Causes target to appear as a log, boulder, bush, or other commonly found item in the local terrain so long as they remain where they are (waking up didn't end the effect but rising from sleeping position would).
The spell wasn't much use versus animals who rely on scent rather than sight, but versus a late night bandit raid it turned out to be a life saver.
Give the Rakshasa a one-man tent which acts as Leomund's Tiny Hut for whomever puts it up. This is really powerful (lots of privacy for the individual, no pesky intrusions) but could be the source of some intra-party contention ("I'm severely wounded, so why do YOU get the secure sleeping arrangements?!?").
Give the Rakshasa an attuned ring which suspends the countdown timer for one 1st-level illusion spell while the wearer is unconscious.
The Rakshasa is, after all, a very dangerous creature and giving it a unique item isn't at all out of the question AND the unique items/spells make great rewards when the group defeats him (or extra reasons to try and hunt him down if he escapes). Just be sure that the item or spell is one you're willing to let your players keep and use BEFORE putting it on the players' radar.
Disguise Self Lasts 1 hour. It needs to be kept up for a Rakshasa to hide its form. Thus, if the Rakshasa is unable to cast Disguise Self at least every hour for any reason, it is unable to hide its form.
The Rakshasa is a fiend. While a Rakshasa is not immune to the unconscious condition, there is no rule or piece of fluff that I am aware of indicating that a Rakshasa needs to sleep. They are immune to the Sleep spell via their magic immunity.
That said, skeletons are also not immune to the unconscious condition, and it's fairly obvious that they don't need to sleep. Ditto for Solars, Balors, Empyreans, Ghosts, Golems, etc. I think this is another case of 5e being "rules-light" and relying on the DM to make some common-sense calls. Again, if you rely on the letter of the rules, I think you and your players will be disappointed.
In prior editions (including 3 and 3.5), Rakshasas were outsiders and explicitly did not sleep. So there's that.
Except by taking the obvious choice of ensuring he sleeps in his own space, preferably behind a locked door.
Rakshasas do make good spies and infiltrators, but not necessarily on long-term missions where they may find themselves needing to bunk up with someone else. Unless that other person has been charmed, blackmailed or persuaded by other means to keep a secret!
Of course, as a DM, you are free to use other means at your disposal, such as granting the rakshasa a magical item that extends the duration of their disguise self spell or simply provides a similar permanent effect while worn.
