An unconverted Leone Nakarawa try got Warriors back into the game in the second half but two more AJ MacGinty penalties, compared to a single Duncan Weir kick, were enough to book Connacht a place in the final at BT Murrayfield on Saturday.
"We are disappointed we didn't play our best game when it was required," Townsend told BBC Scotland.
"When it comes to a semi-final or final you have to play very well to win and we didn't do that today."
"In attack we just didn't have the control or the patience to hold onto the ball, to go through that extra phase in the first half," Townsend added.
"We rushed things a little and weren't as fluent as we can be but in the second half we showed what we can do and came right back into the game but it's a pity we couldn't sustain that."
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