Following Saturday's 2-1 defeat at Watford, the team have slipped to 20th position in the Championship, just two places and three points above the relegation zone, albeit with a game in hand over most of the sides below them.
Speaking on Goals on Sunday, club captain Davies insists the spectre of relegation has not been discussed in the dressing room, but says the failure to get into the promotion picture after their demotion from the Premier League last season has alarmed him.
"It's difficult," he said. "We were expecting to be at the top end and it's been a difficult couple of years for us as a club.
"There's been a lot of changes. I didn't expect us to go down from the Premier League, I thought we'd be okay, and it's difficult to take.
"We've got a fantastic squad and we've missed key players - Stuart Holden, Lee Chung-Young and David Wheater - but we hold no excuses. We've got a good enough squad and we shouldn't be where we are - but we are.
"It [relegation] has not been mentioned, but it's frightening to look after the result against Watford and see how close we are down there. It's quite scary.
"But we'll stick together, will keep working hard on the training ground and everything is in place; the squad, the manager and it's a fantastic club.
"We've just not managed to put anything together this year; no back-to-back wins and it's been very inconsistent really."
Bolton threw away a one-goal lead against Watford and have only picked up two wins in their last nine Championship games.
But Davies insists the players are getting to grips with the new approach of Dougie Freedman, who replaced Owen Coyle in October, and he expects things to improve under the new manager.
"It's a different style of play for us, but we've got a fantastic squad," he said.
"It's a little bit different, but he's been there three months now and we all know what's required and we all know our roles as players.
"There's competition right throughout the squad for places, so there's no excuses. We're playing well, just not doing enough to win games, which is frustrating.
"Yesterday's game was typical of our season really. We dominated for large parts, but we let them back in with the goal we conceded.
"It's just been one of those seasons that's been really frustrating. When you get a positive result you think you're going to go on and have a fantastic run, but it's just not happened for us."