This occurs at the same time as the game's interlude. To progress, you have to accept a quest from Simon and complete that sidequest (Change of Pace) to progress further in this scenario. That sidequest is very simple and straightforward so you should be able to complete it in a few minutes.
Upon returning to the hotel, Simon will take you down the elevator to the Arena, below the hotel. This location will allow you to take on a variety of challenges. Upon completing a challenge, you'll earn a star rating. Your first star rating will also come with a reward. You can try out all the tasks to get at least the first-time reward and 1-star reward at least.
Once done, return to the lobby and talk to Lilysse for a scene. Once you're in control, Arnice will be in another surreal place. Talk to “Lilysse” to trigger the next cutscene. After the dialogue, you'll be able to perform a blood offering ritual to increase Arnice's level and stats, as well allowing her to learn new skills. After this ritual, you'll can select one question for the shrine maiden before the dream ends. Also, you'll be able to access Arnice's Skill menu.
After more cutscenes, the scenario will be complete.