Everyone is back at the Solanas, in Kate and Martin's case not exactly by choice. They had booked into a small hotel in the romantic Old Town but were double-booked and end up in the old complex. The Garveys are being paid for by Madge's boyfriend, Mel, who owns several tanning salons in Manchester. Mick does not really like him but tolerates him because of the free holiday.

Kate starts to feel broody and she and Martin spend the evening baby-sitting Chantelle's child Coolio. Everyone else goes to the hotel bar's karaoke where, after a very high-pitched rendition of 'Lonely Girl', Mel proposes to Madge.

Janice tries to dissuade Madge, unsuccessfully, from getting married. The Oracle organizes an arm-wrestling contest, where the last two sitting are Martin and Mateo. For Martin it's personal and, cheered on by the Brits, he humiliates Mateo and becomes Kate's hero again.

Everybody heads off to a bullfight, except for Chantelle and the Oracle. Somewhat apprehensively she asks him for a date and he accepts. The bullfight is meant to be free to enter but Mel has to buy a food mixer from Janey, the travel rep, before the party are allowed into the corrida. It is a farce; there is no bull, just a large dog with a hat with horns on chasing Mateo around the ring.

Kelly, Mateo's ex-girlfriend comes to the Solanas with her mother, Sylvia, who like Madge, rides an electronic scooter. Madge is convinced that Sylvia is out to steal Mel from her and squirts her with sun tan lotion before pushing her and the scooter into the swimming-pool. Martin is suspicious that Kate is trying to get back with Mateo and breaks into the bedroom he believes they are using. Instead he finds swingers Donald and Jacqueline terrorizing Mateo by inserting a cucumber in one of his orifices.

Angry and upset that Mick has forgotten their wedding anniversary, Janice goes off for a walk on her own and stops off at a bar. It is owned by Jack, an English lad in his early twenties, along with his sister, both orphans. Jack tells Janice that she is beautiful and that he is in love with her but she panics and hurries back to the complex.

Kate disappears with her luggage, and Martin, after an initial assumption that maybe she had gone to the shops tracks her down. She has good news for them. Dorothy, the mother of Gavin, half of the gay couple, comes to visit. Gavin is annoyed by Donald and Jacqueline's constant comments that he and his mother look the same age. Jack also comes to the complex in search of Janice, declaring his love for her, though she gets rid of him. Chantelle and the Oracle's date is ruined when he drinks too much Dutch courage and passes out.

On the eve of their wedding, Madge and Mel take a stroll along a romantic, moonlit beach, only to discover that it is a 'dogging' beach where people go for public, casual sex, and they are importuned by a man up for a threesome. (Needless to say Donald and Jacqueline are there as well.) The wedding day dawns and Janice has a pep-talk with Madge - she is the only one of Madge's five daughters still speaking to her. Assured that her mother is making the right decision, she takes her place at the beach ceremony, but the marriage is not finalized because the Oracle hang-glides out of the sky, falling onto Mel. Mick hits him and gets arrested whilst the groom is carted off to hospital.

Following Madge and Mel's wedding, Janice and Madge hitch a ride to the hospital with a stranger who turns out to be the wanted criminal Enrique "The Rat" Lopez. When the pair are held hostage, it's up to the other guests to rescue them.

For their part in capturing Enrique "The Rat" Lopez, the Brits return for their reward, a free holiday. Martin has separated from Kate and brings along the younger, vulgar Brandy, though both insist they are just friends. Mel is opening a shop renting mobility scooters ("You don't have to be a cripple to enjoy your holiday") employing lazy young Paco and his poolside reunion with Madge is passion personified. Mel gets Mick to publicise the opening by having him ride a twenty foot bike whilst wearing tinfoil, which cooks him in the heat. Everyone turns up for the grand opening - largely because of the free champagne. However, due to faulty lighting the shop catches fire.

Noreen, the Oracle's mum ,assumes he is gay when he tells her he is not interested in currently dating women and she seeks advice from Gavin and Troy. Whilst most of the other guests are on a day trip to a water park, the Oracle goes to an internet cafe and meets, online, a woman called Lesley, though, unbeknown to him, Lesley is actually a transvestite. At the water park Mick antagonizes everyone by arguing with Madge and Mel and Martin ends up in the nude when Brandy steals his clothes whilst he is swimming.Back at the bar Mick makes up with Janice when he says it with flowers but Martin sends Brandy packing for humiliating him and she ends up kissing Paco. The biggest humiliation is reserved for the Oracle, however, when his mother 'outs' him from the karaoke stage and performs 'Y.M.C.A.' with the Stewarts and Gavin and Troy dressed as the Village People, causing him to flee in horror.

Having finally convinced his mother that he is not gay, Geoff the Oracle goes to meet Lesley, his internet chat date. However he is shocked to find that Lesley is a transvestite and makes his escape halfway through their dinner, leaving Lesley to cop off with the maitre d'. Mel takes the sea-sick Garveys on a trip to Peacock Island, where he hopes to buy land for development, only to be told that it is a protected nature reserve. Brandy beds Mateo, stealing his pass-key in the process,but returns to Martin, saying that she only has eyes for him.

Gavin gets into an argument over a burger with a hefty woman with a young Indian husband in tow. Madge is shocked to see it is Valma, one of her estranged daughters, who has come to Benidorm by coincidence. Valma is a wealthy landlady but, despite Janice's best efforts to bring a reconciliation, Madge is convinced that she has followed them out to get Mel's money. Someone who is after Mel's money is Gary, a con man, who poses as a property developer. His accomplice is Brandy, who is also his girlfriend, and they fleece the tourists, using the pass-key Brandy stole from Mateo, to access their rooms. Whilst Madge, high on Ecstasy tablets which she mistook for pills, is performing 'Up, Up and Away' at the karaoke night, the two crooks make their getaway.

The Brits count the cost of the burglary. Kate flies out to support Martin, sending Madge packing when she suggests that Martin was an accomplice, and giving him hope of a reconciliation. His mother Diana also arrives, and seems to know the area - and particularly Mateo - better than she should. The Oracle is almost arrested for wasting police time when he lies about trying to foil a whole gang of burglars but gets another date with Chantelle, and Troy confesses to Gavin that he has a son, aged twenty-one. Madge and Mel are entertaining everyone on the trampoline at the new cabaret club when news arrive that the burglars have been caught.

Martin's hopes of marital reconciliation are ended when Kate tells him she has a new boyfriend and leaves without him. However, he does get to meet someone else and there are happy endings too for the Oracle and Chantelle who plan to move in together on return to Manchester,and the gays as Troy introduces Gavin to his son. Wink, an obnoxious friend of Donald, who annoys everybody with his practical jokes, has no such luck as, taking things a joke too far, he literally dies laughing at the karaoke. Madge and Mel have decided to relocate to Benidorm, where Mel is to buy the cabaret club and, as the others return to England, they serenade them all with an oddly affecting version of 'Spanish Eyes'.