Take the levada to Monte (go right if you're facing down the mountain) - an easy hour's walk, and then catch a cable car to Funchal or to the Botanical Gardens.
Hotel is nice, the location is great but being on top of a mount makes is less warm and sunny than the city, the staff are very friendly but overall the service isn't 5-star quality due to details.
Don't lose the spa and the massages (try Ayurvedic Abhyanga massage, or the Rasul marble mud or Hamam body treatments). Great experience, nice staff, good indoor pool.