With the aim to characterize the formation and propagation of bulges in cylindrical rubber balloons, we carry out an expansion of the non-linear axisymmetric membrane model assuming slow axial variations. We obtain a diffuse interface model similar to that introduced by van der Waals in the context of liquid-vapor phase transitions. This provides a quantitative basis to the well-known analogy between propagating bulges and phase transitions. The diffuse interface model is amenable to numerical as well as analytical solutions, including linear and non-linear bifurcation analyses. Comparisons to the original membrane model reveal that the diffuse interface model captures the bulging phenomenon very accurately, even for well-localized phase boundaries.