If you want to stay in the sunny south — the Algarve —and you want to avoid the more touristy town, try Salema. A good mixture of locals, so you can watch the fisherman getting their boats ready on the beach before heading out for the day. There is an excellent beach with mostly locals relaxing.
Rick has a extensive resources about Portugal on his website.
He recommends the A Maré (The Maré), Praia de Salema 8650-194 Budens, as a reliable place to stay.
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