Pousada Palácio de Estoi

A few kilometres inland from the Algarve coast the landscape changes completely: low hills, orange groves, whitewashed villages, almost no development. Estoi is one of those villages, and at the top of it stands a pink Rococo palace with terraced gardens that were laid out in deliberate imitation of Versailles.

The palace was restored by Gonçalo Byrne, one of Portugal's most significant living architects, and what he did with it is the interesting part. Rather than furnish the interiors as a period reconstruction, he left the historic shell alone and inserted something unmistakably contemporary inside it. In the public rooms this produces frescoed ceilings and chandeliers hanging over plain modern sofas, a juxtaposition that is not remotely subtle and is much better for it.

The 63 guest rooms mostly abandon the 18th century altogether: clean, crisp, modern, with private balconies as standard. The drama is outside the door rather than inside it, which is a defensible decision given how the alternative usually turns out.

The gardens are the reason to walk around: statuary, tilework, staircases, busts, and a level of ornamental ambition that is startling for a village this size. Below them, and within walking distance, are the Roman ruins of Milreu, a substantial villa complex with mosaics and a temple, occupied from the first century onwards.

There are outdoor and indoor pools, a spa and a restaurant working with regional cooking. Pets are welcome.

The trade is the beach, or the lack of one. You are inland, about twelve kilometres from Faro airport and a fifteen-minute drive from the coast, in a village that is quiet after dark. For anyone touring the eastern Algarve, Tavira and the Ria Formosa, that is an advantage. For a beach holiday it is not.

It is a member of Small Luxury Hotels of the World.