I tried a good number of steps here but did not work. Called Apple tech support and these steps worked.
On phone
Uninstall watch app
Reset network settings
Go to Settings>General > Reset >Reset all network settings
Phone restarts. Setup wifi password again
Install watch app again
On watch
Press the crown and the bottom button together
When apple logo shows up, press the bottom button only, it will give option to erase all contents to factory defaults
Start pairing process again between phone and watch.