Hostel Santa Maria
Time Out says
Really special hotels are few and far between in old-town Funchal, but this place is a diamond in the rough thanks to its welcoming staff, fantastic location on Rua Santa Maria, and warm, rich decor in an old school sensitively converted into a handful of rooms and suites and two 8-bed dorms. The place is immaculately clean, as are the shared bathrooms, kitchen and comfy lounge, and treated to brekkie plus afternoon fruit and freshly baked cakes. For everything else, the colourful garden restaurant is a laidback retreat, and serves a fine mix of international and local cuisine, from pizza to tasty filete de espada.