Difficulties to unlock Apple Watch 4 with watchOS 7.6.1 and iPhone XS to unlock since the last update, need to retry 7, 8, 9 times and more

I have the same issue. Put the watch on, open iPhone 11 running iOS 14.7.1 and watch won’t unlock. Try several more lock/ unlock attempts and nothing. Wait 1-2 minutes and watch unlocks when I unlock phone. The reverse is less predictable. If I have a face covering on, watch unlocks my phone about 30% of the time. Both used to be flawless prior to the update that supposedly fixed the unlock issue for Touch ID. iPhone 11 uses Face ID.

Lock or unlock Apple Watch

Try this first;

And if that doesn't work try unpairing and repairing,you might have to setup as new.