Does this bubble mean that I should replace the hose?
Yes. This hose is the thing connecting your lungs to your air supply. I know people take risks and replace hoses when they actually start to leak and I've had a few fail over the years as well while I learned my lessons but why would you not want to avoid problems instead of fixing them?
If you had to ask the question, then the hose needs to be replaced. It's that simple.
R..