We present a novel relativistic density-functional approach to modeling quark matter with a mechanism to mimic confinement. The quasiparticle treatment of quarks provides their suppression due to a large quark selfenergy already at the mean-field level. We demonstrate that our approach is equivalent to a chiral quark model with medium-dependent couplings. The dynamical restoration of the chiral symmetry is ensured by construction of the density functional. Supplemented with the vector repulsion and diquark pairing the model is applied to construct a hybrid quark-hadron EoS of cold compact-star matter. We study the connection of such a hybrid EoS with the stellar mass-radius relation and tidal deformability. The model results are compared to various observational constraints including the NICER radius measurement of PSR J0740+6620 and the tidal deformability constraint from GW170817. The model is shown to be consistent with the constraints, still allowing for further improvement by adjusting the vector repulsion and diquark pairing couplings.