The ancient and prosperous port of Valencia, Spain's third city, has long felt it deserved more recognition than it receives.

This week it sailed off with the prize of hosting the next America's Cup, the oldest and most prestigious regatta in the world, and now it is preparing to sail the international high seas of cool.

The Mediterranean city has a reputation for flamboyance. If northern Catalan neighbours are stereotyped as austere and businesslike, and Andalusians to the south indolently seductive, Valencians are exuberant and in your face.

Their firecracker fiestas are the noisiest and fiercest in Spain, their taste in architecture and dress both stylish and over the top, and their lust for life summed up in the name of one of the city's favourite bars: Vivir sin Dormir – live without sleep.

The city's mayor, the appropriately striking Rita Barbera, who energetically promoted Valencia's candidacy to host the sailing contest, compares the America's Cup's likely impact on the city's future to that of the 1992 Olympics on Barcelona. The games transformed the Catalan capital, making it the hottest destination for any European craving to be hip.

Valencians believe their city will supplant Barcelona as a Mediterranean showcase. Because, unlike Barcelona ahead of 1992, or Bilbao before it underwent the Guggenheim revolution, Valencia is no backwater of faded grandeur and industrial decay. It is already in the vanguard of Spanish style. The regatta is expected to make it both luxurious and chic, a combination rarely found in Spain.

Up to 1.5bn euros is expected to cascade upon the city in the next four years, 15,000 jobs will be created to create hotels and other installations destined to attract 10m tourists.

Valencia's successful bid for the contest was attributed this week to an unprecedented political unity among city, regional and national authorities (Valencia is both the city and the autonomous region). And, what is more surprising, between the ruling parties and the opposition: Valencia is run by the conservative Popular Party, but the Socialist opposition wholeheartedly backed the bid. The government in Madrid gave full support, as did Spain's most distinguished yachtsman, King Juan Carlos.

Now begins the countdown to 2007. The authorities hope to develop the city's yacht marina into the finest in Europe, in a project dubbed Balcon al Mar – Balcony to the Sea. Competitors will be based there, and when the competition is over the waterfront will become a world class real-estate jewel.

Access motorways, an expansion of the airport and the high-speed train link from Madrid are already in progress. The government this week promised to accelerate work on the high-speed AVE to be ready by 2007, ahead of time.

It is difficult to overestimate the impact of a train that will whisk residents of landlocked Madrid to the beach in a breathtaking 90 minutes.

For a nation condemned for centuries to endure long, arduous journeys from one far-flung centre to the other, the prospect that a Madrileno might visit the sea for the afternoon offers a barely credible glimpse of paradise.

Property prices, on Valencia's Mediterraenean coastline and along the projected high-speed rail track, have been ballooning for several years amid a property boom nationwide. But, while prices overall are softening, Valencia expects its boom to continue, swelled by the Cup's fair winds.

Valencia already has a spectacular Arts and Science city, a swaggering complex of soaring white galleries and theatres designed by the architect Santiago Calatrava, born in Valencia. And the city's ancient glories from baroque churches to art nouveau railway stations have been handsomely smartened up.

The old port is as dashing and glamorous as that of Barcelona and its restaurants comparably avant garde and sophisticated.

In Spain, Valencia is already appreciated as a vibrant, stylish metropolis.

So why not make Costa Blanca Charters based in Denia (just 41 miles from Valencia) your port of call for chartering to experience the America's Cup.