Rio de Janeiro ? Heavily armed drug gang members engaged in an intense firefight with police, then fled into a luxury hotel popular with foreign tourists and held about 30 people hostage for three hours Saturday before surrendering.

The upscale, beachside neighborhood of Sao Conrado where the Intercontinental Hotel sits was transformed into a war zone as upward of 50 gunmen with high-caliber rifles, pistols and even hand grenades faced off with police.

A police spokeswoman said the gunbattle began when police spotted about 10 cars and vans leaving the Vidigal slum heading toward the nearby Rocinha slum, one of Latin America’s largest.

Both shantytowns are controlled by the Amigos dos Amigos (Friends of Friends) drug gang, and the spokeswoman said the gang members were leaving an all-night party in Vidigal when they ran into the police patrol and began shooting.