I think it's locative just like the sentence about the restaurant I replied to earlier :) Whenever something is IN something, it's locative, for example:

• in the bank = w banku
• in the park = w parku
• in the water = w wodzie
• in the garden = w ogrodzie
• in your head = w Twojej głowie
• in your dreams = w Twoich snach

Added "dama".

In a way, "dama" is even a better translation... it's just that 'pani' is hard to translate. It's something between 'woman' and 'lady', it's not exactly any of those...