Top Areas in the Algarve to Open a Boutique Hotel or B&B
Looking to open a guesthouse or B&B in Portugal? Explore the top areas in the Algarve for tourism demand, licensing access, and lifestyle fit.
From charming historic towns to sun-drenched coastal villages, the Algarve offers a range of locations ideal for opening a boutique hotel, guesthouse, or B&B. But not all areas offer the same potential — some attract premium-paying visitors and operate year-round, while others are more seasonal or face licensing restrictions.
Whether you’re targeting wellness retreats, seaside escapes, or lifestyle tourism, choosing the right location is one of the most important decisions you’ll make.
This guide highlights the top areas in the Algarve for running a successful hospitality property — based on demand, accessibility, guest profile, and licensing feasibility.
🌅 1. Lagos (Historic Center & Surroundings)
Why it works:
- Popular with both short-term tourists and long-stay digital nomads
- Historic charm, walkable center, strong year-round appeal
- Close to beaches, marina, restaurants, and activities
- Easy access to Faro Airport (under 1 hour)
What to consider:
- The historic center of Lagos is ideal for converting traditional townhouses into charming guesthouses
- Some zones face AL license restrictions, so it’s critical to verify before purchase
- Buildings here often have character and location, but may need renovation and compliance upgrades
Best for:
Townhouse guesthouses, boutique B&Bs, cultural or experience-based stays
🏛️ 2. Golden Triangle & Vilamoura
Why it works:
- Algarve’s luxury hub — draws golfers, families, and upscale travelers
- Strong demand for quality accommodation with premium pricing
- Year-round tourism with high repeat visitor rates
- Proximity to golf, tennis, marinas, Michelin-star restaurants
What to consider:
- Property prices are higher, and zoning can be complex
- Guesthouses here must be well-branded and professionally run to compete
Best for:
Luxury B&Bs, design-forward boutique hotels, villas with guest wings
🐚 3. Carvoeiro & Ferragudo
Why it works:
- Coastal villages with dramatic cliffs, quiet charm, and growing tourism demand
- Good infrastructure and accessibility
- Plenty of villas and townhouses for conversion
What to consider:
- Licensing is generally accessible, though some condominium buildings may restrict AL use
- Focus on personalized guest experiences to stand out
Best for:
5–8 room guesthouses, villa conversions, romantic stays
🏞️ 4. Monchique & Inland Countryside
Why it works:
- Wellness, hiking, and eco-tourism focus
- Ideal for rural tourism (TER) projects
- Larger plots and lower prices than coastal areas
- Peaceful retreats just 30–45 min from beaches
What to consider:
- Infrastructure upgrades often needed (septic, access roads, etc.)
- Requires rural zoning approval for TER license
Best for:
Retreats, yoga or wellness guesthouses, nature lodges
🕍 5. Tavira
Why it works:
- Authentic, beautifully preserved town with architecture appeal
- Popular with Northern European travelers seeking culture, not just beach
- More flexible AL licensing than Western Algarve (for now)
- Expanding tourism but not yet saturated
What to consider:
- Limited supply of large buildings — most projects involve townhouse conversions
- Seasonality is stronger (April–October)
Best for:
Heritage guesthouses, boutique B&Bs, cultural stays
🏘️ 6. Silves & Barrocal Villages
Why it works:
- Inland charm, Moorish history, and relaxed pace
- Great value for money on larger plots
- Tourism increasing with cycling, hiking, and rural escapes
What to consider:
- Requires strong branding to attract guests beyond peak months
- TER licensing may be suitable for farmhouse or rural estate projects
Best for:
Traditional B&Bs, farmhouse stays, local food or agri-tourism retreats
How to Choose the Right Area
Ask yourself:
- Do I want a lifestyle business or a high-volume operation?
- Will I live on-site or hire staff?
- How seasonal is my business model?
- Do I want a rural retreat, urban guesthouse, or coastal boutique stay?
- Is my property in a zone where licensing is feasible?
🎯 A balanced location offers strong demand, license eligibility, and potential for year-round occupancy.
Still Searching for the Perfect Guesthouse Location?
Not sure whether to buy near the beach, in the countryside, or a historic town?
We help buyers identify the right property and location — with guidance on AL rules, rural tourism licensing, and off-market listings in top-performing areas like Lagos, Monchique, and the Golden Triangle.
