What happened

Shares of Airbnb (ABNB -2.37%) were falling today as worries about an economic slowdown seemed to sweep the market a day before the vacation rental website reports third-quarter earnings. Additionally, a Wall Street analyst issued a bearish note for the travel sector.

As of 10:06 a.m. ET, the stock was down 4.7% while the Nasdaq had lost 1.2%.

So what 

Investors seem to be steeling themselves for another 75-basis-point increase in the federal funds rate ahead of the Federal Reserve rate decision on Wednesday. Mortgage rates have surged over the past six months, impacting Airbnb operators, especially professionals who run multiple listings. Social media sites abound with anecdotal reports of Airbnb rentals that are now for sale, and a number of operators have complained that local markets have become too saturated.

Additionally, higher interest rates are expected to cool off the economy, and travel spending tends to be discretionary, meaning consumers would likely spend less on Airbnb during a recession.

In an analyst note this morning, Needham's Bernie McTernan said a vacation supply rental tracker based on listings on VRBO, Vacasa, and Evolve showed supply growth in the industry is slowing and listings on VRBO actually declined sequentially in October. That could be for seasonal reasons, because Airbnb is taking market share, or because supply growth in the industry is fading after a boom over the last year in the travel recovery.

Now what

Airbnb is widely expected to report strong results tomorrow afternoon for the third quarter, its seasonal peak. The analyst consensus calls for revenue to jump 29% to $2.84 billion and earnings per share to increase from $1.22 to $1.46.

However, given the stock's pricey valuation, investors will likely be paying close attention to any signs of weakness in its guidance. If the company misses the mark there, the stock could take a hit.