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Sao Miguel, Azores, Portugal - Where to stay and what to do

We have booked tickets to Ponta Delgada in Sao Miguel for a this summer. My husband and I will be there for a week and think we want to stay in two locations on the island. Where do you recommend we stay? Currently, we are looking at hotels but would consider an Airbnb or villas of some sort. We want to spend time by the water but we also want to do plenty of hiking and sightseeing, including visiting the Sete Cidades, Lago do Fogo, Furnas, etc. Would love any recommendations. We are planning to rent a car.

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