The effect of habitat loss on the decline of resource specialists has been well documented in coral reef fishes, since they have a narrow habitat range. However, the different competitive advantages of specialists and generalists can impact their performance under varying habitat conditions. The order in which species arrive into a community influences competitive outcomes; these ‘priority effects’ may modify communities within degrading resource scenarios as individuals migrate in search of higher quality resources. In this study, we investigated: 1) how sequence and timing of arrival affects interactions between habitat generalists and specialists in healthy and degrading environments and 2) how prior residency interacts with habitat quality and resource specialisation to affect propensity to migrate. We conducted manipulative field studies using the damselfishes Pomacentrus amboinensis,a habitat generalist, and Pomacentrus moluccensis, a live coral specialist, on live or dead coral habitats. Timing of arrival differed between early and late arrivers (residents and intruders, respectively) by 1, 3 or 24 hours. Our results demonstrated that the strength of priority effects (i.e. aggression intensity) increased with increasing timing of arrival, suggesting that willingness to defend valuable resources increases with the length of the priority period. Propensity to migrate from dead to live coral varied depending on which species was the resident, with P. moluccensis (live coral specialist) more likely to migrate when it was the resident than P. amboinensis (habitat generalist). This indicates that both prior residency and resource specialisation affect propensity to migrate to higher quality habitats, which will impact future success. The degree to which ecological versatility and priority effects modify competitive outcomes in coral reef fishes is important to understand, in order to predict how our changing environment will impact fish community dynamics. Further research should examine a greater range of specialist and generalist species across future habitat degradation scenarios.