If you would prefer not to stay in one of Funchal's many big hotels, and don't need all the facilities, this place is worth a look. It was built in 2006 and has just 18 rooms, all with balconies. It is just behind the huge Pestana Casino hotel, which means it is an easy walk to the city centre and also very close to the restaurants and bars of the tourist/hotel zone.
It is a boutique-style hotel with very smart, stylish rooms. The views over the car park of the neighbouring quinta and across to other hotels are nicer than you'd think (and you can see the sea to the side).
There is a small (chilly) outdoor pool and sun area and a small bar and TV room. The breakfast room also does evening meals but there are many more appealing restaurants (in terms of ambience) close by.
The only drawbacks I can think of are that the street it's in is not exactly pretty (on the non-balcony side) and that it's very hard to approach by car due to the one-way system. Also, contrary to what most booking websites say, it has an internal garage, not a car park.
There was also a bit of low noise from a boiler vent just above my balcony and, although it's a quiet street, you may get a little bit of noise when people leave the nearby restaurants.
Otherwise, recommended and I'd definitely stay here again.