The Over The Rainbow contestant was offered a part in the theatre production by the former Strictly Come Dancing judge but instead decided to play Sinead O'Connor in the Channel 4 soap.
Speaking at the Galaxy National Book Awards, Phillips told PA: "It was the right move, absolutely. She'll do Hollyoaks for a while. She's a brilliant musical theatre artist, she has a great voice, she's a great dancer and a fantastic actress. She needs to do this now and then the world's her oyster. She's a real talent."
Speaking of her decision in August, Davis told DS: "I realised that Hollyoaks was what I wanted to do, and I had to let Arlene Phillips know what I was going to do about Flashdance. In a way, I'm gutted that I let Arlene down, but I'm so glad because I've had a fantastic time and I'm loving every minute of it."