Lisbon has some of the best budget accommodation in Europe - its Living Lounge is hostelling refined for the wheelie bag generation...

A Chez Long, suspended table and art; the Living Lounge is not your average hostel. Photo HostelWorld

Lisbon always places well in the annual Hoscars - awards voted for by more than 1m users of the booking website - and I went to check out a former winner in the “best character” category.

I know, I know: anyone above a certain age will be thinking plywood furniture, chores, lockouts and nights without sleep. But then the Living Lounge really isn’t like any hostel you’ve seen before. For starters, the designer lounge area had a vintage barber’s chair and chaise longue, both reupholstered in snazzy red fabric. Towards the rear of the room a couple of thirtysomethings were playing chess at a tabletop suspended from the ceiling. Light streamed through the windows; jazz wafted from the speakers; and a 1950s sideboard held a carafe of port on a silver tray.

Free port? In a hostel? Isn’t that a recipe for semi-naked drinking games for the few and sleep deprivation for the many? Not here. It's true that when I checked in there was a knot of young people drinking beer in the bar area, but the mood was more beau monde than vagabond. And one especially striking guy in a white shirt and designer jeans even raised his bottle in salutation.

Looking from the dining table to the reception area at the Living Lounge. Photo HostelWorld

I looked into the spotless communal kitchen, the smart Internet lounge and the funky, fake-turfed sitting room upstairs, but found no backpacks. Where were the dreadlocked travel junkies in Thai fishermen’s trousers and batik ponchos that had peppered my own earlier backpacking days?

Clearly the hostel set had smartened themselves up alongside the new generation of crackingly modern and trendy hostels.

The warm welcome and smart surroundings would knock spots off a lot of pricey hotels, but a dorm room is a dorm room, however smartly you tart it up. Like at most hostels these days though, you can rise above that. Here for example there are 10 twin rooms, costing just €56 a night, B&B.

Mine was bright, fun and, like all the rooms, dedicated to an aspect of Portuguese culture — in my case, the poet Fernando Pessoa. His quotes were painted on the walls, one of his trademark black trilbies hung from coat hooks made of umbrella handles and a see-through wastepaper-basket lamp shade, full of shredded paper, diffused the light and made a wry comment on his workaday office life.

Living Lounge is not the only winning hostel in Lisbon, although it is my favourite, and I've visited a good few. But importantly, the others charge about the same rates and are similarly smart, cosy and friendly.

One of the Living Lounge's 10 private rooms. Photo HostelWorld

Like Living Lounge, they are all located right in the middle of town, can organise fado evenings or pub crawls, and dispense tips and advice with genuine enthusiasm.

If, however, you really can’t face the fraternal feel of the hostels — and shame on you — then Lisbon is awash with good-value hotel rooms. The Trivago index, which measures the average price of double rooms by city, has Lisbon as the cheapest capital in western Europe, at £90 a night; by comparison, Amsterdam's average is £131, Copenhagen's £149, and London’s is £155 (as at November 2016) .

And you don’t have to do dingy to get a good deal in Lisbon. Even a double at the supersmart boutique hotels of the Heritage group can be had from €143. And if you simply can’t be without your Four Seasons, then Lisbon’s is the cheapest in Europe (that I can find), still up at €540 a night — it’s €1,190 in Paris.

Lisbon's Old Belem Lighthouse, Discoveries Monument, and '25 de Abril Bridge'. Photo My Bathroom Wall

So much for sleeping. You are unlikely to break the bank eating out here, either. Lisbon is a frugal foodie’s Shangri-la (though the glam Asian chain is yet to open a property here themselves). Even the city’s speciality is just 80p a go. Okay, so it is only a custard tart. Grab a paper tube containing several of them from the Antiga Confeitaria de Belem (Rua de Belem 84), sit out by the River Tagus and polish it off while still warm, all crispy pastry and topped with cinnamon— a divine little treat.

Back at the Living Lounge, I ate a three-course dinner with wine for €10, downed several €1 bottles of local beer, said goodnight to the gang and went to bed. On the opposite wall were the words of Fernando Pessoa, embossed in red enamel: “I know not what tomorrow will bring.” True enough. But, whenever I wake up in Lisbon, at least I know I’ll be able to afford it.

I travelled as a guest of Hostelworld

Getting there: Lisbon airport handled 20 million passengers in 2015, with direct connections across Europe, North and South America. Cities served by national carrier TAP include Boston, London Gatwick, London Heathrow, Manchester, Miami, Rio de Janeiro, Stockholm and Toronto. Plus Emirates flies to Dubai, British Airways flies to London Heathrow, Turkish Airlines to Istanbul, and as from July 2017, Capital Airlines to Beijing.

Where to stay: other great Lisbon hostels include the Travellers House, Rossio (Calçada do Carmo 6), Living Lounge and Lisbon Lounge, and Lisboa Central. All can be booked through Hostelworld; or try Hostel Bookers

Further information: see Visit Lisbon