I think a lifestyle location could be a cool underdog hiring strategy, at elates if you accept that you all your hire will be relocation hires. IE, if you are wiling to pay big city salaries in a small town location, that could be attractive to some people. Not everyone and obviously if you have Google/Facebook hiring requirements it's not an option. But, if you need to hire 5-10 a year it might work. Not everyone will want it. But, the minority that do want it want it a lot.
IE, imagine a couple with small kids from London comings for an interview to a nice location in Crete. Instead of a tiny London 2 bedroom, they can move into a nice cottage. They can save hours a day in commutes and get more cash into savings. That will appeal to some employees (or their wives/husbands). You can't say Crete is objectively better or worse than the London buzz. But, it is different in a way that will inevitably appeal to some.
The problem is that it's hard not to adjust your salary expectations (as an employer) to local salaries and that just isn't compatible with relocation hiring. People don't relocate for a lower salary, even if cost of living is lower. I think the EU has a lot of these possibilities that are still under appreciated.
If you think your main win/lose parameter is the quality of people you can hire, you should think creatively about how to win here. It's hard to win competing head-to-head.