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With towering mountains on one side and the crashing waves of the Atlantic Ocean on the other, Funchal in Portugal is a truly picturesque city. The capital of Madeira, it's the island's beating heart, with a mix of historic buildings, quirky modern museums and an upbeat nightlife. Guitar music and the smell of tropical flowers float through the streets, while the market stalls heave with fresh passion fruit and bananas harvested inland. Once home to Christopher Columbus, the city is the ideal place to indulge your adventurous spirit.

Like the city itself, hostels in Funchal combine history with nature. You can stay in a former elementary school, a 230-year-old ex-embroidery factory or beside a banana farm. It is easy to find a Funchal hostel with outdoor space where you can relax in the island's year-round warmth, with tropical fruit trees and ivy-covered balconies adding a lush feel. Some Funchal hostels have self-contained apartments as well as dorms and rooms, so you can make the most of the fresh local produce in your own kitchenette.

The area around the Mercado dos Lavradores (Farmer's Market) is one of the liveliest parts of Funchal. Rua de Santa Maria (Santa Maria Road) is lined with bars selling the local drink, poncha, a mix of fruit juice, cane sugar alcohol, sugar and honey. Praia Formosa (Formosa Beach) is just outside the city centre and has four Blue Flag beaches and its own buzzing nightlife. The marina and Santa Luzia waterfront have views out to the ocean and plenty of restaurants serving seafood.

For fans of football, the CR7 Museum is worth a look for its weird and wonderful collection of Cristiano Ronaldo's trophies. Madeira's other most famous export is its fortified wine, and you can learn all about it (plus have a sip or two) at Blandy's Wine Lodge in the city centre. For street art, you can take a wander along Rua de Santa Maria – almost every door is painted in a unique way by local artists.

Madeira International Airport Cristiano Ronaldo is known for its dramatic landing: there's no flat land on the island, so the runway is built out over the ocean. It's about 20km from Funchal city centre, and you can hop on a shuttle or public bus from the airport to the town. Funchal itself is small enough to wander around on foot. If you fancy getting out and seeing more of Madeira, you can hire a taxi for the day or hop on a bus.