Madeira is a really fun destination and not all twin-set and pearls at all. However, it lacks sandy beaches, so if you have little ones who want to paddle and build sand castles, catch the ferry from Funchal to the tiny island of Porto Santo. There's not much to do on the island except swim, eat and watch Christiano Ronaldo's massive hotel being constructed(purchased along with Figo, I believe), but it's a great day trip and the ferries are the old Isle of Man boats.
Boutique-style hotel in a carefully modernised manor house. The rooms are small but tastefully and comfortably furnished. Food is good. Service is relaxed and friendly. I had the most relaxing break just over 3 hours from home. Best to fly with TAP direct from Gatwick.
Estalgem Quinta Mirabela, Caminho do Monte, Funchal, Madeira
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