In a nutshell
- Funchal is one of the best places to stay on Madeira — it has the largest selection of hotels and great connections to everywhere on the island.
- Where you stay in Funchal really matters. We break down three distinct neighborhoods — the Old Town, the seafront, and the hillside — so you can pick the one that suits you best.
- Our top hotel picks are the Three House Hotel in the Old Town, the Pestana Vila Lido on the seafront, and the ARTS IN Hotel Conde Carvalhal on the hillside.
The Best Neighborhoods to Stay in Funchal with Map
Funchal is the capital of Madeira and sits on the southern coast, tucked between the ocean and the mountains. It’s one of the best bases for staying on Madeira — with the widest selection of hotels and great connections to the rest of the island.
Even though Funchal isn’t huge, where you book really matters. Get it wrong and you might find yourself hiking steeply uphill from the city center every time you return to your hotel.
Our neighborhood picks for where to stay in Funchal
- Funchal Old Town: Ideal if you want to be close to the main attractions and are planning day trips by bus or guided tour.
- By the ocean: Perfect if you want a peaceful location with direct water views from your room.
- On the hill: Great if you’re after stunning panoramas and don’t want to spend too much on accommodation.
Staying in Funchal's Old Town
A hotel in Funchal’s Old Town is the right call if you want to be close to the top sights and plan to do lots of day trips.
The historic center is home to most of Funchal’s must-sees and you’ll have a huge selection of restaurants and shops right on your doorstep. There’s always something going on, and you’re guaranteed not to get bored.
If you want to explore Madeira without a car, the Old Town is the perfect base — most buses depart from here and guided tours start here too.
One thing to keep in mind: the Old Town can get seriously crowded during the day when cruise ships are in port. Come evening, it quiets down and feels much more authentic.
Advantages of staying in the Old Town
- Lots of attractions and restaurants
- Excellent bus connections
- Most guided tours start here
Disadvantages of staying in the Old Town
- Very touristy (especially during the day)
- Not the typical natural feel of Madeira
Our hotel recommendations for Funchal’s Old Town
There are loads of hotels in Funchal’s Old Town across all price ranges. A really standout option with free parking and a rooftop terrace is the Three House Hotel — it’s also one of our favorite boutique hotels in Funchal.
If you’re after a solid, affordable place to stay, we’d suggest the Apartamentos Turisticos Atlantida. They regularly have great deals.
Good and affordable
Better
Luxurious
Oceanfront Hotels in Funchal
Staying by the ocean is ideal if you don’t want to be in the thick of things, love walking along the waterfront, and want direct sea views from your room.
There are plenty of oceanfront hotels in Funchal, most of them located to the west of the Old Town. Swimming spots and beaches are limited, but the location is genuinely lovely — you get plenty of peace and quiet plus fresh sea air.
Almost all the hotels here offer fantastic views, a pool, and plenty of extras that make a Madeira stay really special.
Just be aware that most oceanfront hotels in Funchal sit at the higher end of the price scale, and the immediate area is mostly tourist-focused.
Advantages of staying by the ocean
- Great ocean views
- Many hotels with a pool or ocean access
- Peaceful location
Disadvantages of staying by the ocean
- Not as well connected, long way to the center
- Few restaurants nearby
- On the pricier side
Our oceanfront hotel picks in Funchal
If you really want to treat yourself, an oceanfront hotel in Funchal is the way to go. The Pestana Vila Lido sits right on a cliff by the sea and also has beach access. Since the water can be quite rough, we’d recommend the outdoor pool with ocean views — it’s seriously gorgeous.
If you’d rather spend a little less, the Madeira Regency Cliff is a great alternative.
Staying on the Hill
Staying on the hill is your best bet if you want the most impressive views and are looking for affordable lodging.
Walk just a few minutes from the Old Town toward the interior and everything heads uphill. Funchal is built on a steep hillside — there’s no getting around it.
The winding streets are lined mostly with residential buildings, but you’ll find hotels, apartments, and traditional restaurants dotted throughout. It’s a super authentic experience compared to the more touristy areas below.
You’ll also wake up to stunning views of Funchal and the bay. The trade-off is that it’s steep in every direction, and since many streets aren’t well served by public transit, you’ll really need a car to make the most of it.
Advantages of staying on the hill
- Spectacular views of Funchal and the ocean
- Authentic neighborhood and affordable prices
- You’re quickly up in the mountains
Disadvantages of staying on the hill
- Poor connections and steep streets
- Limited restaurant options
Our hotel recommendations on the hill in Funchal
The ARTS IN Hotel Conde Carvalhal offers excellent value for money. The rooms are cozy, the views are great, and it’s only about a 15-minute walk down to the center. On the way back you’ll have to walk uphill — but nowhere near as steeply as other hillside options.
