While travelling I stopped in these hostels.
Lagos: Olive hostel
Olive hostel is magic! Beautiful inside, clean and kept in perfect order by a very nice and helpful staff. The location is great, it is pretty close to the center and a 10-minute walk far from the nearest beach. Maybe it costs a bit more than the prices at which I am used to, but I was there in high season: however, definitely worth the expense.
Albufeira: Lost & Found hostel
Unfortunately it is quite far from the city centre, but there are some beautiful beaches nearby. A very well organized hostel, new and complete with all facilities.
Fuzeta: Hostel Solar das Marés
Friendly staff, clean hostel and safe place to store your bike.
Faro: Well’come to Algarve Hostel
The dorm was a little overcrowded and hot.
It is two steps away from the bus station and five minutes from the train station. The staff is very friendly!